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.
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.
Don't get distracted. We need business investment
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.