Lori provided an overview on the state of BC's economy. The presentation covered three main areas from Chartered Professional Accountants, BC (CPABC)’s thought leadership initiatives: the BC Check-Up, Business Outlook Survey, and the profession’s initiatives.
BUSINESS OUTLOOK SURVEY - looks at what the CPABC members think of the current economy, and what they’ve identified as the biggest challenges to business success in the province.
Overall, there was less optimism about the two-year outlook for BC’s economy. Perceptions of near-term prospects for both the BC and US economy have worsened when compared to last year. Almost one-quarter of respondents believe BC’s economy will grow faster than the Canadian average in the next two years. One-third think it will grow at approximately the same pace while one-quarter feel BC’s economy will grow at a slower pace. These expectations are consistent with last year.
Respondents are relatively optimistic about their business. The ability to attract and retain high caliber employees/skilled labour is still identified as the most substantial challenge to business success. Among those who saw this as the greatest challenge, almost three-quarters of respondents said their business experienced recruitment challenges.
The top economic issue currently challenging business success in BC is housing prices. Unsurprisingly, those in the Lower Mainland and on Vancouver Island are more likely to indicate housing prices as a challenge compared to respondents in other parts of BC.
Barriers to trade is the next most challenging economic issue, and is rated significantly higher than it was in 2017.
All around us, there are significant drivers of change that will have an impact on business now and on an ongoing basis into the future. There’s a long, perhaps infinite list… Tightening trade borders, the end of high oil prices, slow economic growth, climate change, the Internet of Things, big data, cyber threats, an aging population, and global geopolitical unrest. Today, the only constant is change. Being resilient and having the ability to recover when faced with change is critical. There is simply no room for complacency.
We know that leading organizations are not just embracing change, they are change-makers, always evolving in order to turn today’s challenges into opportunities and competitive advantage. This does not mean they are adopting change for the sake of change. Instead, they are remaining nimble to near-term changes while taking a long-term outlook.
DRIVERS OF CHANGE - Economic; Environment; Technological; Societal, and Geopolitical.
Before considering the economy as a driver of change, consider where we are starting from. The World Economic Forum ranked Canada 14th (out of 137) on the 2017-2018 global competitiveness index, which was a slight improvement from the previous year. The global competitiveness index was put in place to motivate much needed improvements in productivity globally. Canada ranked seventh overall for efficiency enhancers, such as higher education and training, goods and labour market efficiency, financial market development, market size, and technological readiness.
Focusing on Canada’s efficiency enhancers, this is an area of focus for the federal government, which is directing investment to fund innovation, technology start-ups, research, environmental sustainability, and infrastructure, including through the Innovation Superclusters Initiative which recently awarded $950 Million to support business-led innovation superclusters. BC’s Digital Technology supercluster, focused on big data and digital technologies, is one of the recipients of part of the $950 million federal fund. The federal government’s stated objective is to help diversify the economy beyond resource-based growth by moving in a deliberate way to a knowledge economy where information drives economic growth. This move to the knowledge economy is also altering the nature of work and the skill sets needed to create value and increase productivity.
Now let’s turn to environmental drivers, according to the 2018 World Economic Forum Global Risks Perception Survey, the most pressing environmental risks are pervasive and closely interconnected with the other drivers of change. For example, changing weather patterns or water crises can prompt or intensify geopolitical and societal risks such as domestic or regional conflict and involuntary migration. In a speech to the Finance and Sustainability Initiative, Deputy Governor of the Bank of Canada, Timothy Lane stated, “Climate change and actions to address it will have material and pervasive effects on Canada’s economy and financial system.” Government research estimates that Canada could face annual costs of between $21 billion and $43 billion by the 2050 if steps are not taken to address climate change. (eg. Extreme weather events, risks to specific sectors, associated with climate change). According to the World Wildlife Fund, rivers, lakes and aquifers are drying up and more than half the world’s wetlands have disappeared. By 2025, two-thirds of the world’s population may face water shortages. This is already becoming a reality with cities like Cape Town, South Africa threatened to run out of water due to drought and population growth.
Moving on to technology as the third driver of change, we know self-driving cars are being tested (mixed success) and drones have delivered pizza for Domino’s. Digital fabrication means 3-D printers are producing component parts for fighter jets, prosthetic devices, living tissue, and even a recent crown on one of Lori's teeth. Billions of people are connected by electronic devices. Quantum computing is poised to enable exponential leaps in computing power, and the push to develop artificial intelligence (AI) has intensified.
Technology-enabled platforms in the “sharing” or “on-demand” economies are upending business models and forcing countries to rethink how they formulate economic policies. We are now said to be in the 4th Industrial Revolution – building on the Digital Revolution as technology becomes embedded within society. McKinsely has called this 4th Industrial Revolution the era of “cheap data”. As with previous industrial revolutions, the transition to the 4th Industrial Revolution will not be trouble-free.
Automation will lead to job loss, or at least to the transformation of jobs. According to a report from the Brookfield Institute for Innovation and Entrepreneurship at Ryerson University, 42% of Canadian jobs are at risk of being replaced by technology in the next two decades. The report also suggests that for the professional accounting industry, there is a 94% probability that some of the traditional work done by accountants and auditors will be automated. This means that competencies need to evolve so the nature of the work done by accountants and auditors evolve with the industry.
More broadly, if these projections are correct, political and business leaders will need to think disruptively and strategically to be successful – and to ensure that jobs evolve to ones that are strategic, not ones that can be automated.
Turning to societal factors, as we all know, demographic and socio-economic trends are among the most significant variables shaping the future. The United Nations projects the world’s population will increase from about 7.6 billion in 2017 to 11.2 billion by the year 2100. Canada’s own population has grown 5% since the last census in 2011 to 35 million people. This is the highest rate of growth among G7 countries, with two-thirds of that growth coming from immigration.
A deeper dive shows even more challenging information. Between 2015 and 2030, the number of people in the world aged 60 years or over is projected to grow by 56% to 1.4 billion, and by 2050, this group will be nearly 2.1 billion. Statistics Canada forecasts that by 2036, the number of seniors aged 65 or over will represent somewhere between 23% and 25% of the total population. A larger, older population could put strains on infrastructure and healthcare. This in turn presents fiscal pressures to fund social supports at a time when economic growth is projected to be modest. It’s not just the aging population that’s rapidly accelerating. Globally, the United Nations reports there are about 1.8 billion young people between the ages of 10 and 24 — an all-time high.
The last driver of change, geopolitical factors. Change is no stranger here. Terrorism, interstate conflicts, and large-scale involuntary migration are among top concerns globally. Uncertainty around global trade is another significant issue. As we know, NAFTA discussions continue (#1 risk), new tariffs are being raised and we have a number of industries that have been targeted (trade war – US and China). At the same time, the world awaits news of what Brexit will mean for trade with the United Kingdom, which is still struggling to determine how to exit the EU. How will tightening borders impact a world economy that has never fully recovered from the financial crisis of 2008, where slow growth has become the norm?
To conclude, ensuring that the CPA profession has a voice within the business sector is critical. We want the government, employers, and other business organizations to understand and value the role that CPAs play in the province’s economy.
CLICK HERE to view Lori's presentation document.
Meeting adjourned with a toast to peace and prosperity.
Club Day!
This will be the 44th year in a row for this weekend at Rotarian Paul McCrea’s (very) rustic ranch in the Cariboo. No TV, no electricity; wood stove and outdoor BBQ feature great fellowship and great meals.
The next meeting of the 
