A season of renewal for Canadian manufacturers

The global manufacturing sector has been making a lot of news lately amid indications that production is being “reshored” to developed economies. What does the future hold for Canada’s manufacturers?

By any measure, it’s been hard times for Canadian manufacturers since the Great Recession descended on the world in 2008–09. By 2012, half a million manufacturing jobs had been lost in Canada compared with a decade earlier, as hundreds of factories closed down.

This spring, however, green shoots of renewed growth were finally appearing after the long winter of the last five years.

More good news ahead

Hope for Canadian manufacturing comes at a time of increasing optimism in many developed countries and a heightened awareness of the importance that manufacturing plays in wealth creation. Much of this optimism centres on the “reshoring” of production to developed countries from China and other developing nations. While it remains unclear to what extent reshoring is occurring in Canada, the sector’s performance has been encouraging of late.

And there looks to be more good news ahead. Canadian factories are well positioned to take advantage of accelerating growth in the U.S. and other export markets in the coming months.

A robust manufacturing sector is critical to Canada’s economic well-being. It’s still the largest employer in the country, providing not only well-paid jobs in factories, but also with suppliers and in the offices of accountants, lawyers and other service providers. Manufacturing is also an important source of innovation in our economy, accounting for half of all R&D spending in Canada.

Better equipped to compete

The impact of the recession was brutal, especially because it was coupled with a rising Canadian dollar and increasing competition from countries such as China and Mexico. But now, the surviving companies are much better equipped to compete both here and abroad, and are benefitting from a decline in the dollar. In fact, an internal BDC study on the competitiveness of Canadian manufacturing found that our companies enjoy a number of important advantages over their international competitors.

First, we have one of the most skilled labour forces in the world. That’s important because jobs in today’s factories are more demanding than ever due to the heavy use of advanced computer software, robotics and other high-tech equipment.

Productivity on the rise

More surprisingly, a separate KPMG study concluded that the overall cost of manufacturing in Canada—wages, energy, corporate taxes and the like—is similar to that in the U.S. and lower than that in other key competitor countries including Germany and Japan.

As well, productivity in the sector has been on the rise since the recession, outpacing productivity gains in the economy as a whole during that period. It’s been a difficult five years for Canada’s manufacturers, but there’s every reason to believe this crucial sector is entering a new season of growth.