The federal government's Fall Economic Statement brought good news to the manufacturing industry in Canada.
At a time when companies are struggling with recent tariffs and uncertainty over the new USMCA agreement, the Statement introduced new and enhanced programs that can help manufacturers stay competitive on the global stage. Key initiatives include:
- Immediate tax write-offs for the full cost of manufacturing and processing equipment and machinery.
- Creation of the Export Diversification Strategy, which includes funding for domestic infrastructure upgrades, expanded Trade Commissioner Services in new export markets, and CanExport programs.
- Removal of inter-provincial trade barriers and improvements to regulatory systems to help simplify and accelerate business processes.
- Additional investment in the Strategic Innovation Fund over the next five years, with specific funds for the forestry sector and an emphasis on promoting clean technology.
What this means for manufacturers
Compared to historic levels, the manufacturing industry has suffered a decline over the past few years in terms of net investment in technology and production capacity. A favourable tax rate once provided a solid competitive edge, but recent U.S. tax reforms and the high cost of doing business in Canada have eliminated that advantage.
The initiatives laid out in the Economic Statement will help companies make more strategic investments and facilitate greater advancements in technology. With the ability to put money back into the business more quickly, Canadian manufacturers can reduce the risk to their bottom line and accelerate their productivity.
The new programs also give companies the tools to develop export relationships outside of North America, which can help diversify their customer base and reduce dependence on the U.S. market.
Next steps for business owners
The federal Economic Statement is a high-level blueprint of things to come for the manufacturing industry. While detailed spending plans are to come with the 2019 Budget, business owners can begin to take first steps towards growth.
1. Build (or revise) your strategic plan
First and foremost, business owners must decide if they will invest or divest. Low interest rates and strong transaction values indicate a market with opportunities for both buyers and sellers. Manufacturers who plan to invest should assess their company's current state and identify any gaps in their technology, processes, and services to start mapping out a clear strategic vision.
2. Invest in Industry 4.0 initiatives
The path to digital transformation will vary from company to company. Focus on a specific business or operational problem to solve, such as productivity gaps or the need for centralized data, and take incremental steps that will build to a larger solution. Prepare and engage your employees with a clear communications and change management plan.
3. Develop your export markets
It's a risky time for import/export relations between Canada and the U.S. Greater diversification of business relationships can help strengthen your company's financial security. Identify stakeholders within your company to drive new opportunities.
4. Consult third-party professionals
To grow and expand into new markets, manufacturers need strong partners who understand the industry. Third-party professionals like BDO can help manufacturers develop a plan, secure funding, optimize government tools and programs, expand globally, and implement digital transformation projects.
The time to act is now
Manufacturing business owners must begin to make investments now in order to stay competitive, or risk being left behind. BDO's team of manufacturing professionals have a comprehensive range of services to assist manufacturers with business transformation and growth. Contact us today to start the conversation.