As the second wave of the COVID-19 pandemic intensifies, Canadian entrepreneurs are gradually regaining confidence in the Canadian economy, despite additional health restrictions, according to BDC’s 2021 Outlook on Canadian Entrepreneurs’ Investment intentions survey. The poll, conducted in December, looks at entrepreneurs’ level of confidence in the economy, business and hiring outlooks, as well as investment plans over the next 12 months. The survey also finds that a growing number of business owners plan to invest more in 2021 than last year.  

Canadian entrepreneurs’ mood has improved significantly from the previous quarter, during which more than 50% thought the economy would deteriorate over the next several months. Net business confidence is up by 34 percentage points from the past quarter. The rise in investment intentions is largely due to growing business confidence and an improved sales outlook. BDC’s 2021 outlook is seeing as many optimistic (35%) as pessimistic (36%) entrepreneurs, a marked improvement. However, high indebtedness, weak demand, additional containment measures and news of virus mutations could dampen this renewed optimism. Investment intentions are improving significantly from last year, but they are expected to remain weak in 2021.

“It’s been a difficult year, and although these are the most positive results we’ve seen since the start of the health crisis, we think business spending will remain weak in the upcoming months,” says Pierre Cléroux, BDC’s Vice President, Research and Chief Economist. “Our survey paints a picture of an economy that will be in a slow but sustained recovery. We’re happy to be moving on to 2021.”

Improving productivity, sales and marketing appear to be the main drivers of investment, while high economic uncertainty remains the main factor holding back investment spending, though to a lesser degree than in previous quarters.

Other key findings:

• There are more entrepreneurs (38%) who expect sales to increase than decrease (25%) in the next 12 months, for the first time since the beginning of the recession last spring.
• Capacity pressure and hiring difficulties are building up, with 50% of Canadian entrepreneurs saying it would be difficult to either hire new skilled employees or meet an unexpected increase in demand because they are operating at or above full capacity. Large companies (29%) are more likely to increase head count.
• Companies in the resources sector are showing a strong recovery in their investment intentions for the coming year, while the situation is deteriorating for wholesalers and technology companies.
• Investment intentions are improving the most in Quebec and the Atlantic provinces, while in other provinces net intentions remain negative due largely to economic uncertainty.
• Entrepreneurs are most likely to invest in intangible assets (53%), such as software, marketing or employee training.