Oil downturn causes Albertas small to midsized firms to slash spending BDC

Oct 8, 2019 ignadvgt

Calgary — Small and medium-sized businesses in Alberta will slash spending more than expected this year as the oil downturn hits every level of the province’s economy, a new survey from Business Development Bank of Canada shows.Roughly 4,000 executives of companies across Canada with between one and 499 employees responded to the survey, which found that smaller businesses in Alberta plan to invest about $11 billion this year, 27 per cent less than last year, compared with a 14 per cent increase in planned spending in B.C., and either flat or modest growth across the rest of Canada.Pierre Cleroux, chief economist at BDC, said  he expected spending to go down in Alberta, but was “surprised by the magnitude of the drop.”How BDC is working to help Canadian companies succeed in the midst of a weak economyAfter the bust, oil boomtown Fort McMurray faces threat of ‘shrinking city’ syndromeHe said this year will be worse than 2015 as the reality of low oil prices fully sinks in, with 66 per cent of survey respondents in Alberta saying a lack of confidence in the economy was their main barrier to investing.“Last year was the first year (of the downturn in oil prices) and a lot of people thought that the oil price would come back quickly,” Cleroux said. “I think people are getting used to this new reality.”“On the capital side, I would say we are certainly being cautious,” said Eric Veenendaal, CEO of RefineCo, a tech firm based in Calgary. “As a professional IT services company, we are largely at the will of what clients are doing in terms of their own capital spending.”With capital spending in the oil and gas sector having dropped considerably, RefineCo has had to look to other sectors such as agriculture and the government for contracts. Two years ago, RefineCo relied on oil and gas for 60 to 70 per cent of its work; now it’s less than 10 per cent, and Veenendaal isn’t betting on any short-term bounce in oil.“Our plans extending out three years down the road basically don’t account for any kind of a spike,” he said.The Village Brewery in Calgary is growing well, but co-founder Jim Button says it’s still feeling the headwinds of the downturn. “You used to be able to say beer is recession-proof, but I think recession-resistant is the word they’ve come up with in the last bunch of years,” he said.The restaurants he supplies have seen overall sales drop 20 to 30 per cent, which in turn cuts into Button’s sales. But that’s been partially offset by people drinking more at home, boosting retail sales, he said.The company is going ahead with its plans to spend about $750,000 in capital investments this year to boost efficiencies and quality, but that’s down from earlier plans. That money, however, won’t go as far as it would have a year ago, because the equipment it needs is priced in U.S. dollars. Button also said there are no plans to hire more staff.

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