Businesses in Canada are experiencing the most profound economic decline since the Great Depression. Many that were already facing hardship, especially those dependent on the oil and gas sector, have had a steeper hill to climb, while some have encountered very few headwinds since the COVID-19 pandemic took hold.
The federal government has exhibited great caution so far to support public infrastructure in response to COVID-19. Existing federal infrastructure programs are characterized by rigid criteria, lengthy timelines and dependency on collaboration between each order of government. Some investments have been fast-tracked, but these represent smaller amounts and a narrower range of projects than anyone in the construction sector anticipated to give the industry the lift it needs.
Provincial governments have been less cautious and more oriented toward quickly solving their most pressing local infrastructure challenges. The far greater barrier for provincial politicians is the fiscal capacity to make investments large enough to stimulate economic growth. Provinces like Ontario, Alberta and British Columbia are in more favorable positions to borrow, while others will be looking for the federal government to invest directly in their priority projects or provide access to its borrowing capacity.
Municipal governments face a host of challenges that will limit their willingness to push for infrastructure investments and their capacity to advance the same. The Federation of Canadian Municipalities (FCM) is calling on the federal government to provide up to $10 billion in emergency funding to help cities and towns respond to lost revenue and added cost pressures due to COVID-19. With operating funds as a top priority, the much-needed request for infrastructure support will have to wait until later in 2020 or even 2021 to become a top request of Canada’s mayors and city councilors to the federal government.
The lack of operating funds in municipalities makes it increasingly difficult for them to serve their residents and plan for the future. Contracting businesses face the challenges of lacking support staff, particularly in the permitting and approvals processes, needed to complete projects already underway and break ground on new projects. The need for cooperation between governments is an added wrinkle that characterizes how the economic recovery of 2020-2021 will differ substantially from that of the Great Recession, which was largely solved through federal interventions that made more credit available.
AED made significant progress early in the pandemic to ensure that members were eligible for as many of the government’s business support programs as possible. AED’s efforts through the recent stages of the pandemic have been characterized by essential successes provincially. Most notably, AED persuaded Alberta’s government to expedite infrastructure funding, which resulted in an investment of over $500 million in provincial assets and projects in advance of Canada Day. These commitments are critical to providing confidence to businesses throughout the construction chain and helping us plan for the future. Alberta has kept its powder dry in recent years and has seen its projected deficit grow from $7 billion in early 2020 to $20 billion.
Most economists have arrived at a consensus of “If not now, when?” for government intervention. The question at the federal level is not whether new money will be committed, but whether they will miss the critical window that will allow operations to continue to prosper and firms to persist into the post-pandemic phase. The construction sector thrives when certainty and stability collide, and both are in short supply. Still, significant pressure will continue to be applied that gets businesses close to the positions they need to make lasting investments in talent and capital.