Big Six bank survey reveals plans for near-term investment amid enduring confidence among mid-sized and large businesses
For many Canadians whose livelihoods and finances have been negatively impacted by the COVID-19 pandemic, the vaccine-led end of the crisis may feel close yet still frustratingly far. But based on a new survey, the majority of mid- to large-sized business owners have their sights firmly set on a brighter future.
In its 2021 Canadian Business Outlook report, Scotiabank reported that around half of mid- to large-sized business owners it surveyed sustain a moderate (36%) or significant (16%) impact on their revenues during the COVID-19 crisis.
Still, three quarters of businesses that were polled shared a positive outlook on the future, with 26% being “extremely optimistic” and 52% being “very optimistic.” Revenues and sales have also improved for many, including 23% of businesses saying they were back to pre-pandemic levels and an equal number saying they’re doing better than before the crisis began.
Financial assistance from the government and financial institutions has been a major contributor to that bounceback. Nearly two thirds (63%) of companies in the survey cited government or bank relief programs as a key source of support. Just over half (54%) of survey respondents said they benefited from the Canada Emergency Wage Subsidy, and nearly four out of five (78%) said they got help from their financial institution in the form of financial support, debt payment deferrals, covenant relief, or information and advice from their banker.
“What we’ve consistently heard from our clients is that the pandemic has been a wake-up call to re-think their long-term priorities,” said Kevin Teslyk, executive vice president, Canadian Business Banking at Scotiabank. “With the economy expected to stabilize and grow in the coming months, many businesses are experiencing a renewed sense of hope for their futures.”
As the vision of a fully recovered Canadian economy gradually comes into view, more than two thirds of survey participants (68%) anticipated that they’ll return to pre-pandemic conditions within six months, while a little more than half (53%) indicated that their company will change for the better in numerous ways.
Over the next six months, 53% of respondents said they’ll be investing in increased technological capabilities and tools; 52% will expand their product offerings or services; 49% said they’re enhancing or increasing their digital and online capabilities; and 45% have their eye on hiring more employees.
The short-run environment promises to be conducive for such activities, with the Bank of Canada indicating that it won’t stray from its policy rate until at least 2023. Over the more immediate term, fading virus-related uncertainties may encourage households and businesses to down the significant accumulation of cash they’ve built up over the course of the past year.
Still, the journey to full economic revival will likely be far from smooth sailing. According to Scotiabank Chief Economist Jean-Francois Perrault, COVID-19 lockdown restrictions and their after-effects will likely continue to ripple throughout the country as the race to vaccinate Canadians continues. Travel, hospitality, and other sectors reliant on in-person social interaction will continue to struggle until the vaccine prompts a change in consumer attitudes, leading him to project that aggregate economic activity will probably not recover to pre-COVID levels until late 2021.
“This means unemployment will remain higher than pre-COVID for some time, and the financial stresses on many firms and households caused by the pandemic will persist,” Perrault said. “There is also a risk the insolvencies for both firms and households will rise when government supports are withdrawn as planned this summer.”
