Jock Finlayson, Executive Vice President and Chief Policy Officer of the Business Council of British Columbia (submitted)

Finlayson: B.C.’s economy devastated by pandemic – and the measures taken to contain it

‘Policy-makers should be acutely sensitive to the financial health of the overall business sector’

In its June 2020 Monetary Policy Report, the U.S. Federal Reserve – America’s central bank — observed that the COVID-19 pandemic “poses acute risks to the survival of many small businesses,” adding that widespread failures among such firms “would adversely alter the economic landscape of local communities and potentially slow the economic recovery and future labor productivity growth.”

The B.C. government would be wise to take this message to heart. Small businesses, as defined by the government’s statisticians, account for 98 per cent of all enterprises and approximately half of private sector jobs.

In the current challenging and uncertain economic climate, policy-makers should be acutely sensitive to the financial health of the overall business sector, including smaller firms.

Many of these companies are in sectors that have been hard-hit by pandemic-related social distancing, outright business closures, dwindling consumer demand, and reduced investment – for example, food services, accommodation, recreation, non-essential retail, travel, arts and entertainment, construction, and personal services.

Compounding the risks for small firms, they also tend to be more financially fragile than larger companies, with most having limited cash reserves and lines of credit.

Although B.C. has done a good job flattening the curve of COVID-19, the province’s economy has been devastated by the pandemic and the measures taken to contain it. For 2020, the Business Council forecasts that economic output (GDP) in the province will drop by almost 8 per cent, which is far greater than the GDP losses experienced in previous recessions.

As of mid-June, B.C. is down 350,000 jobs compared to early 2020 — a catastrophic fall in employment. While the worst of the COVID-19 economic downturn may be over, the consequences of steep declines in GDP, employment and business activity since February are expected to be felt for years to come. And much of the pain will be visited upon smaller and mid-sized enterprises in every sector and region of B.C.

The dramatic slide in consumer spending and business activity triggered by mandated closures across large segments of the economy, coupled with the virtual cessation of travel, border closures, and the onset of a global recession, has already led to casualties among B.C. firms.

Under the government’s staged economic reopening plan, many formerly shuttered businesses are – or soon will be — open again.

However, in sectors like retail, restaurants and bars, leisure, recreation, hotels and motels, and personal services, businesses are now required to maintain strict social distancing for customers and staff, to limit the number of people on-site, and to devote more resources to cleaning and sanitation.

This amounts to a significant change in the operating environment for many businesses, one that is likely to translate into both lower revenues and higher costs.

Looking ahead, a substantial number of businesses will not last through the end of 2021. We estimate that at least 10 per cent of the 200,000 B.C. businesses with paid employees could be gone in the next 6-18 months.

Some will make the difficult decision to cease operations, while others will be forced into insolvency because they are no longer able to cover their bills or service their debts.

The impact of a shrinking private sector will not be limited to business owners/operators. Fewer firms also mean lost jobs for B.C. workers, less vibrant communities, and greater economic hardship for families.

Faced with this alarming prospect, the provincial government must do what it can to minimize mortality among locally-based companies. Equally important, it should focus on creating an environment that supports business start-ups to help fill the gap that will open up as thousands of existing companies fail.

Despite a few positive steps, to date the NDP government has come up short in supporting the business community and in encouraging new business formation.

In fact, the government has largely carried on with its pre-pandemic policy agenda, which paved the way for increased tax and regulatory burdens for most businesses and higher payroll costs for employers.

A change of direction is necessary if policy-makers are interested in kick starting economic recovery and making British Columbia a top-ranked jurisdiction for new private sector investment and entrepreneurial activity.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Provincial COVID-19 data can now be used for B.C. to prepare for a second wave

In the past week, B.C. has seen a slight spike in daily test-positive case counts

Four air ambulance flights out of Terrace delayed or cancelled

Pandemic precautions caused nighttime closure of service station providing weather data to pilots

Skeena Resources, Tahltan prez excited by purchase of Eskay Creek

Skeena gets full control of mine, Barrick gets 12 per cent of Skeena and a one per cent royalty

VIA Rail lays off 1,000 unionized workers across the country

Northern B.C. route Jasper to Prince George to Prince Rupert is not affected by VIA Rail layoffs

Overall house sales drop in the northwest

COVID-19 pandemic slowed market activity

B.C. records 62 new COVID-19 cases, two deaths since Friday

Province has just over 200 active cases

Hotel rooms for B.C. homeless too hasty, NDP government told

Businesses forced out, but crime goes down, minister says

Wage subsidy will be extended until December amid post-COVID reopening: Trudeau

Trudeau said the extension will ‘give greater certainty and support to businesses’

B.C. government prepares for COVID-19 economic recovery efforts

New measures after July consultation, Carole James says

Tree planters get help with COVID-19 protective measures

Ottawa funds extra transportation, sanitizing for crews

Trudeau apologizes for not recusing himself from WE decision

He says his and his family’s longtime involvement with the WE organization should have kept him out of the discussions

Beverly Hills 90210 star’s family selling Vancouver Island Beach Resort

You can own Jason Priestley’s Terrace Beach Resort in Ucluelet for less than $5 million

Islanders want BC Ferries to follow order that lets residents board before tourists

For ferry-dependent communities, ferries are often the sole practical lifeline to work, school or medical appointments.

Most Read