Fraser Forum

Maritimes had lowest levels of per-worker private-sector investment in Canada

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Maritimes had lowest levels of per-worker private-sector investment in Canada

It’s no secret that Atlantic Canadians have suffered from a prosperity gap compared with the rest of Canada. In the decade leading up to the pandemic (2010 to 2019), income in the Atlantic provinces (as measured by per-person GDP) was just 86 per cent of the rest of the country. In simple terms, this means Atlantic Canadians have lower living standards than the rest of the country and strengthening the private sector is key to closing this gap.

Our recent study shows that across measures of business investment, entrepreneurship, venture capital investment and private-sector employment, the Atlantic provinces largely underperform most of the rest of Canada.

Private-sector investment, for example, remains crucial for prosperity because it finances the new factories, machinery and equipment, and research and development that ultimately make workers more productive and improve living standards. Unfortunately, relative to the rest of the country, private-sector businesses are not investing in the three Maritime provinces. Consider that in 2019 (the latest year of non-pandemic-influenced data), private-sector investment per worker in Nova Scotia was just $11,300—the lowest in the country. Prince Edward Island was second last ($11,400) while New Brunswick was third last ($13,800).

Other measures tell a similar story. For business startups, a key measure of entrepreneurship, Newfoundland and Labrador ranked sixth, Nova Scotia eighth and New Brunswick ninth.

All four provinces ranked below average in venture capital investment per person, a measure of private-sector investment in startups and early-stage businesses. Improving the conditions for new business creation and investment remains a key component of a healthier private sector.

There are bright spots in the data. Newfoundland and Labrador ranks first in the country in per-worker business investment, largely due to the province’s oil and gas sector. P.E.I. leads the country in business startups. However, with some exceptions in individual categories, the five measures used in this study show that in 2019, private markets in the Atlantic provinces generally underperformed those in the rest of Canada.

Given the weakness of the private sector in the region, it should not be surprising that the government sector dominates the local economies. In Nova Scotia, government spending (at all levels) encompassed 60.2 per cent of the economy in 2019, the highest in the country followed closely by P.E.I. (58.5 per cent) and New Brunswick (57.4 per cent). Newfoundland and Labrador fared slightly better (44.1 per cent), ranking sixth but still higher than the national average (40.1 per cent).

Atlantic Canadians, like any other Canadians, want higher incomes and improved living standards. To achieve this, it’s crucial to have a strong private sector.