There are several factors that businesses use in determining where to set up. St. John’s has a lot going for it. Lucky for us, any drawbacks that do exist can easily be mitigated as there are readily available solutions. The key is that these solutions need to be proactively pursued.
The impact of small business on our economy is significant. Small business contributes 25 per cent of our gross domestic product (GDP). In Canada, 70 per cent of people are employed by small- and medium-sized businesses. In Newfoundland and Labrador, 91 per cent of private sector employees are employed by small- and medium-sized businesses. The vast majority are businesses with less than 25 employees. This trend holds true for St. John’s and for the membership of the St. John’s Board of Trade.
A strong, vibrant business community provides the products and services needed and wanted by residents. A strong vibrant business community creates wealth, which is then used to pay taxes, employ people and contribute to the community.
We need more business, not less. So, let’s consider what goes into an entrepreneur’s decision in determining where to set up shop.
On demand
There needs to be demand for a product and service. Demographics has a large impact on this. The older one gets, the less they consume. Our province has an aging population, suppressing the demand for single-family homes and all the contents that go in them.
A solution is increased immigration. Increasing a population through immigration helps create demand as the immigrants look for places to live and all the things they need to set up life in a new location. Demand for housing leads to new home construction, which has a trickle effect in the economy as a whole. You can’t grow an economy without growing the population.
Labour market
When deciding where to set up shop, entrepreneurs also look at the labour market. A talented, educated labour pool with a concentration of 25-40-year-olds is appealing. This group is the most adaptable in an ever more dynamic work world. Also, 25-40-year-olds are at their peak for purchasing power. Unfortunately, in St. John’s, our labour force is skewing to the higher end. The average worker’s age is 45 and more people are ready to retire rather than set to enter the workforce.
The solution again is increased immigration. With more than 3,000 international students at Memorial University we have a ready, young, talented and educated workforce right on our doorstep. Let’s do everything we can to keep them here.
Red tape
The regulatory burden is cited as one of the top barriers to starting a business. According to the Canadian Federation of Independent Business, the total annual cost of regulation for Canadian businesses of all sizes is estimated at $37 billion, up from $32 billion two years ago. The number of hours that an average business spends on regulation is 842 hours (105 business days), up 12 per cent from 749 hours (94 business days). As well, Canadian businesses pay considerably more per-employee in regulatory costs than their U.S. counterparts. Businesses with fewer employees are hit disproportionately hard.
The solution, at the municipal level, is to complete the regulations for our municipal plan. Give business certainty and a clear set of rules to guide them.
Taxation
To attract new businesses, we must be competitive. Business owners have a lot to consider when they look at the cumulative impact of taxes and fees from all levels of government. The tax burden for a Newfoundland and Labrador business is significant. The city didn’t seem to understand the impact when, despite our discussions, they increased the tax burden on commercial realty by 5.8 per cent in the recent budget.
The solution is to freeze commercial taxes. While the tax burden on business is already high, business owners are also concerned about the new carbon tax which will increase annually over the next few years, as well as the uncertainty surrounding electricity rates in our province.
The provincial government should eliminate the levy. The independent tax review committee called it a poor tax policy. It is regressive and closer to a head tax than a progressive income tax.
The provincial government should also offset the carbon tax. It should return the revenue received from the new carbon tax to citizens and businesses in the form of tax cuts. More money in the pockets of businesses and taxpayers will help our economy.
A successful private sector is at the core of any prosperous and sustainable economy.
Newfoundland and Labrador has so much potential, however, there are threats to ensuring our economy remains strong and prosperous in the years to come. If we are not strategic and focused, we run the risk of being victims of poor planning. We need a concerted effort. We cannot be complacent.
Andrea Stack is chair of the St. John’s Board of Trade.
