A snapshot of the post-COVID B.C. business sector

In April 2022, my colleague David Williams published a blog post highlighting the importance of fast-growing and large businesses in driving prosperity. He noted that in 2019, before the onset of the COVID-19 pandemic, businesses with 50 or more employees accounted for 56% of British Columbia’s workforce, up from 53% two decades earlier. Moreover, the largest businesses, those with at least 500 staff, supplied 26% of all jobs in B.C. in 2019.

The above figures are from Statistics Canada. It is helpful to keep them in mind when looking at the most recent snapshot of the province’s business community, produced by the B.C. government with data extending through the end of 2021.

As in past years, the latest report finds that small businesses – defined as those with fewer than 50 employees – make up 98% of all businesses in B.C. By the government’s count, the province is now home to more than 500,000 individual businesses. The vast majority of these consist of one-person operations and “micro-businesses” with fewer than five employees. Only 8,600 companies in B.C. have at least 50 paid employees. The accompanying table provides the details.

Source: Small Business Profile 2022, Government of British Columbia.

How many businesses operate in the various sectors that make up our economy? The chart below summarizes the distribution of small businesses by sector as of 2021. Not surprisingly, service industries dominate, in part because the production of services accounts for more than three-quarters of British Columbia’s gross domestic product, but also because service industries, on average, are more “labour-intensive” than industries which produce goods.[1]

Source: Small Business Profile 2022, Government of British Columbia.

Government reports and public statements by ministers and other government officials understandably are inclined to point to the positive role of small businesses in the economy. For example, the 2022 small business profile report observes, approvingly, that B.C. has “more small businesses per capita” than other provinces, that they employ a bigger share of the workforce than elsewhere in Canada, and that B.C. leads the country in the rate of self-employment. These statements are accurate. But they are not necessarily signs of underlying economic strength. A healthy economy is also one where a significant number of companies scale in size, where some large locally-based firms operate, and where businesses unable to generate profits eventually leave the market. These features of a robust business environment are just as important as having a vibrant small business sector, but they are rarely mentioned by elected representatives.

The Business Council has done extensive research on the benefits that flow from the presence of larger firms in a regional economy. As the B.C. government’s data show and our research has confirmed,[2] on average bigger companies pay higher wages/benefits, they are more likely to export and to engage with external markets, and they are better positioned to invest in innovative activities. Larger businesses are also responsible for most non-residential private sector capital spending, including on machinery, equipment, structures, and advanced process technologies that are key to boosting productivity.

For B.C. policymakers, the message is clear. While public policy needs to foster an economic environment that encourages entrepreneurship, the entry of new firms, and a thriving small business community, advancing prosperity also depends on business growth and the development of a critical mass of successful medium-sized and larger local firms.

[1] Using Statistics Canada’s classification framework, manufacturing, natural resource extraction, construction, and utilities are categorized as goods-producing industries.

[2] Business Council of B.C., From Good to Great: The Benefits of Scaling Up B.C. Businesses (November 2017).