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Small Business Outlook 2012

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What are the most pressing issues facing small businesses for 2012?

Small businesses continue to be concerned with the number of customers walking through the door. Given the global economic conditions, that’s top of mind. In terms of political policy, provincially we’re looking at a couple of things. One would be making sure that we do get back to a balanced budget as soon as possible. Then, after that, the provincial government making good on its commitment to reduce the small-business tax. It’s only fair. Small business owners are spending on their companies, training their staff, and often paying their staff well. These two things are very important for the economy.

A big, big challenge is to get municipal governments to be more mindful of how they spend taxpayer dollars. They spend out of control, but by and large are not admitting that they have that problem. They’re spending four times more than the population growth and the inflation rate over a 10-year period, and they’re still saying that they have a revenue problem. It’s not a revenue problem; it’s a spending problem. That’s one of the big challenges we need to focus on. It’s hitting the small businesses in the pocketbook, because they pay property taxes. In this economic climate, that can be particularly challenging. The property tax bills that small businesses are hit with are grossly disproportionate to the services that they use. They’re paying way more than what they use in services. Yet they have fewer votes than residents. Small businesses are lashing out against this, so we’re very active on that file. We also see red tape strangling business.

Tell us more about that.

Red tape is basically a hidden tax on business. It’s right in the face of small businesses all the time in a way that the general public doesn’t experience. Sure, a regular person may get frustrated in filling out their taxes, or going through the hassle of getting a City Hall permit to do renos. But for small business, red tape is a day-in-day-out problem. To its credit, the BC government is the first government in Canada to set a target for reducing red tape – by one-third in three years. The government has actually exceeded that target. It’s kept itself accountable by continuing to measure and report its progress. At CFIB, we’re trying to take the BC model and push it out across the country.

After a couple of years of hard work, CFIB is getting governments to take the whole problem of red tape seriously. We dedicate a week in January to raising the profile on red tape. We ask politicians to make supportive announcements. Last year, we got Prime Minister Stephen Harper to make an announcement in January during our Red-Tape Awareness Week.

What were the lessons for small business from the last downturn? How did small businesses in BC weather the 2008 recession?

One of the things I love about small businesses is that they tend to be very resilient and optimistic. I think that certainly helped them weather the downturn. It’s hard to generalize, because there are many business owners who will say things are great, never been better. Others are still struggling. I think there’s still a lot of nervousness out there. It’s a really all about focusing on how you can do well with loss, and about being innovative within your constraints. It’s about being creative. It’s about seeing glasses half full instead of half empty, and finding a way to make the best of sometimes tough situations. Many businesses looked around and identified processes that weren’t working, or got rid of a product that wasn’t working and stopped selling it. Those decisions ultimately will make businesses stronger. It tends to be the trend after recessions that businesses become productivity-based, because they are really focused on being more productive and creative.

Confidence in British Columbia has remained fairly steady given the global uncertainty. It’s a slower-growing economy than what we had in BC before 2008. But we were booming before that. One of the things we’re seeing is that the western provinces have been consistently more optimistic than the eastern provinces.

Were there industries that did better in the last recession?

The agriculture sector had been hit quite hard earlier, but optimism even there is starting to come back a bit. I think it’s more a case of individual businesses doing well versus whole sectors doing well or not. However, people in technology resources as a whole are feeling optimistic. The biggest challenge they have right now is shortage of labour, which seems crazy compared to other parts of the country. But that’s actually their biggest issue, particularly in the north.

Do you think the shift to the Asian market helped?

Certainly the demand for resources coming from Asia has helped. Particularly in the western provinces, our trade mix has changed. We’re less dependent on the US than, say, Ontario, and that’s helped us weather the storm better than the eastern provinces.

Given what you’re saying about innovation, are we in better shape right now as an economy than two or three years ago for weathering another hit?

I think we’re in better shape in the sense that we’re coming from several years of good times. Businesses have set resources aside, set money aside. If we were hit with another really big downturn, I think there’d be a lot of companies that would really be struggling.

How do you rate Premier Christy Clark’s performance to date?

I think she’s done some really good things for business. For example, the municipal government desperately needed a little more oversight. As I said, the provincial government did something about that, so two thumbs up. And we’ve talked about the government acting on the issue of red tape. It’s not the sexiest headline you’re going to get, but it’s very, very important thing for small businesses. Then there are other areas where we scratch our heads. Family Day? That’s going to be very expensive. The bulk of the cost for that holiday is going to fall to small businesses. Now Family Day been postponed, which is good news, but it’s still going to be a big hit when it comes through – unless they do something to mitigate it.

How are things being run at the municipal level, the city of Vancouver?

I’m very disappointed with their announcement that they are reducing the amount of the tax shift. They had made a policy where they take some of the burden off business because businesses pay way more than residents on valued properties – and, as we were saying, it’s completely unfair. I think they should be trying to reduce the taxes for everyone, but it’s wrong that a business pays more than four times what a resident does. Municipal employees at the provincial level make five percent more in interest and benefits than equivalent jobs in the private sector. That’s one of the reasons property taxes are going up and other fees keep going up. Council needs to get serious about managing those costs.
I’ve been disappointed with this council on many fronts. Bike lanes are another example. It’s not about whether or not you support bike lanes. It’s about Council’s unwillingness to consult, to look for other options that would work better for small business.

Are you into doing economic forecasts?

The best story I ever heard about forecasting was someone saying, “If I could forecast, I’d be rich!” I don’t know that many rich economists out there. On the other hand, when I was on a CBC business panel earlier this year, I actually didn’t do too bad a job. They asked me about interest rates. I didn’t think interest rates would go up very much. Then we did see a pretty stable interest rate climate. I think 2012 is going to be a little bit more of the same, but with some silver lining.

I can also tell you, based on our survey, that the bad news from Europe seems to have clients buying only what they need. And I think that that kind of sums it up. Even for people whose incomes haven’t changed, whose situations haven’t changed, the global uncertainty has them feeling nervous and saying, “Let’s rein it in a bit. Let’s not go for the frills and the extras.” Even people who still have their jobs are feeling the uncertainty. That means fewer nights out at restaurants, fewer retail purchases; maybe they’re not going to go on vacation this year. And that’s affecting business.

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