Looking for reassurance at a time like this
Published Saturday October 11th, 2008
Economy In the shadow of global malasie, government can give New Brunswick businesses a ray of hope
FREDERICTON - As he watches the global stock markets continue to be pummelled by the spreading economic crisis, Ronald Losier says the New Brunswick business climate will be impacted.
The chief engineer for St-Isidore Asphalt Ltee said the only question he has is whether the provincial government can construct a policy that allows the economy to withstand the worsening global crisis.
For Losier and the company's 250 employees across New Brunswick, the key to staying afloat during these turbulent times is having the government commit to infrastructure investments. Roughly half of the company's $30 million worth of annual sales relies on provincial infrastructure projects, so Losier said having the government commit to paving roads, building bridges and constructing buildings would go a long way to sustaining local communities.
"It is a perfect time for the government to look at increasing the infrastructure and construction to put more people at work with the services that they have," Losier said. "If there is one time that they should do that - it is during a recession.
"I think even the industry is willing to accept a couple of years of deficit to help this slowdown that looks like it is going to come and after that you should go back to a more sound (policy)."
The drying up of credit in the United States is one of the instigators of this crisis. Canada's financial institutions have been largely insulated from the pain inflicted on their U.S. counterparts, but now New Brunswick companies are beginning to worry about the credit crunch moving north.
"Liquidity is going to be a factor. I definitely think it is going to have an impact. Everybody is going to be more prudent in regard to what is happening," Losier said.
Andreea Bourgeois, director of provincial affairs for the Canadian Federation of Independent Business, said access to capital is always a chief concern for small businesses. With the spate of dreary predictions on the credit crunch hitting Canada, Bourgeois said it is only going to dampen the mood of many businesspeople.
One way to offer hope to struggling businesses, Bourgeois said, is for the government to reveal its intentions on its tax reform agenda this fall instead of waiting until the spring budget. For businesses that may be on the knife edge this fall, just knowing that deep tax cuts are in the offing could factor into their decisions on not laying off staff or keeping the doors open.
"That is something that gives hope to entrepreneurs and gives them time to plan," Bourgeois said. "A lot of them are scared because of the perception (of tough economic times). They are saying 'It isn't bad for my business,' but I think people around me aren't doing OK."
Anne Hebert, executive director of the Conseil economique du Nouveau-Brunswick, agreed that so far the most significant negative impact the economic crisis is having on local companies is psychological and not financial.
Headline shock is what is exacting a psychological toll on many small business owners.
"When you see the word recession in a newspaper, people get afraid and start cutting back and that creates a recession. Businesses in New Brunswick most likely aren't feeling it right now," Hebert said.
The latest statistics provided by the Canadian Federation of Independent Business show a third of its members nationwide indicated they are expecting stronger growth in 2009.
Assessing the Canadian, and specifically New Brunswick, data sources, Bourgeois and Hebert's analysis stand up as the province has not been slammed by a raft of bad news lately.
New Brunswick's unemployment rate dropped to eight per cent in September from 8.4 per cent. Statistics Canada also reported that the employment rate is up slightly to 59.1 per cent and the number of unemployed people dropped by 2,000.
Further, the Royal Bank of Canada issued an updated economic forecast of the New Brunswick economy Wednesday, indicating New Brunswick will be among the top tier of growth leaders in 2008 and 2009, with real GDP hitting two per cent and 2.5 per cent growth respectively.
Fuelling the economic growth will be the mega-projects in the energy hub. The bank did forecast the forest sector will continue to be hard hit as it takes longer for the United States to come to recover.
The New Brunswick forest sector experienced that pain this week when St. Stephen-based Flakeboard laid off 42 employees. Kelly Shotbolt, president of the company, said the provincial government could help the sector in this difficult time by addressing the high cost of energy.
"In light of the global financial crisis, it is more critical than ever to address the high energy prices in the province," he said in an email. "As challenging as our business is, we cannot continue to disproportionately bear the costs of laying the gas pipeline across the province."
Energy Minister Jack Keir said the province will not use NB Power as an economic development tool, suggesting Business New Brunswick will continue to help companies invest in ways to become more efficient as a means to cope with high energy prices.
"I'd like to keep those lines as black and white as possible that NB Power is not an economic development tool. It is an electricity company owned by the people of New Brunswick, that has to give reliable electricity and deliver power at as low of cost as possible," Keir said.
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