We have talked a lot about housing and for good reason. But we have to be able to walk and chew gum at the same time. We need to talk about private sector business investment. One measure of investment is the value of building permits. This doesn’t take into account the machinery and equipment in the buildings but the costs associated with new builds, renovations, etc. is a good proxy for business investment. And it is a good proxy for business confidence. As I have discussed multiple times before, business investment is a bet on the future. If a company believes they can amortize the amount invested over a reasonable time horizon and make a reasonable return on that investment, it will make the capital outlay. Otherwise, it won’t.
If we go back to January of 2021, when were kind of coming out of Covid to July of this year, New Brunswick ranks 9th among the 10 provinces for the value of industrial building permits issued, 9th for commercial and 7th for institutional and governmental. Comparatively, we are only seeing half the investment as in the rest of the country in all three categories.
Before the pandemic, New Brunswick was doing better ranking 6th among 10 provinces for industrial, 7th for commercial and 6th for institutional/governmental building permits issued. Compared to the national level, NB was only 5% lower for industrial, 25% lower for commercial and 20% lower for institutional/government.
BTW, Nova Scotia is not doing much better ranking 8th for industrial, 8th for commercial and 9th for institutional/governmental on a per capita basis since January 2021. Of course our friends on the Island are killing it (relatively) ranking 2nd for industrial building permits (27% above Canada), 3rd for commercial (11% above Canada), and only 6th for institutional and governmental (32% below Canada).
New Brunswick and Nova Scotia can’t take growth for granted. We have to be able to deal with the consequences of growth (health care, worker shortages, long wait times for permits, etc.) and work on the underlying longer term drivers of growth.
If we are not seeing industrial or commercial investment (building permits) that is a warning and one we need to heed.
Great article. You make very good points that need more attention, as usual. There are many businesses in NB that are individual or family owned. You are right that the businesses need to have confidence in the future. One factor is the surrounding economy. The other is confidence in the succession plan of the business. There has to be a way for the ownership of the business to transition to future generations. Many business owners in NB and the maritimes are approaching retirement age. If there is no confidence for a future successful transition, investment will be minimizsd. We need more standardized structures and incentives for employees and others to buy or invest in businesses. One structure widley used in the UK and US is the Employee Ownership Trust. It provides structure and incentive for the business to transition to future generations, shares financial benefits of ownership with employees, creates incentive for the long term health of the business. With increased confidence that the business will transition and succeed in the future, the business is more likely to invest and expand.