With the B.C. election out of the way even as the COVID-19 pandemic continues to rage, the returning NDP government faces the challenge of crafting a refreshed strategy to manage the economic fallout from the virus while also positioning the province for a prosperous future. Looking beyond the pandemic, a key part of a renewed B.C. economic strategy should be to retain, grow and attract more corporate headquarters.
Governments around the world are keen to develop robust corporate head office sectors, for a variety of reasons. Head offices directly support high-paying jobs across a mix of professional, managerial, financial and technical occupations. They also procure goods and services from local suppliers, thus benefitting other businesses in the region. A solid cluster of corporate headquarters fosters greater demand for retail and other services in a community thanks in part to the high average incomes of head office employees. Finally, there is a positive relationship between the vibrancy of the corporate head office sector and business community support for charitable activities in the health care, education, social service and cultural domains.
In short, policy-makers and community leaders are right to focus on attracting and nurturing the growth of corporate headquarters.
Unfortunately, Metro Vancouver has long been an also-ran as a centre for the head offices of large and even mid-sized companies. Over time, the region has seen the broadly defined corporate sector shrink, in part due to consolidation in industries like mining and forestry but also because of take-overs of significant B.C. enterprises that subsequently scaled back their local economic presence or disappeared altogether. On the other hand, B.C. and Metro Vancouver have also gained as a result of the growth of other locally-based firms, some of which have evolved from small businesses to become considerably larger organizations. However, in aggregate the ledger shows Metro Vancouver as a poor performer within Canada when it comes to the relative size of the head office sector.
Statistics Canada’s most recent Annual Head Office Survey confirms the basic story. The target population for the survey consists of all establishments grouped in Code 551114 – which is the definition for head offices in the North American Industry Classification System (NAICS). These are establishments and locations that are “primarily engaged in providing general management or administrative support services” to affiliated organizations. Essentially, establishments in Code 551114 can be thought of as the headquarters of large and medium-sized Canadian-based enterprises.
Table 1 below shows the number of Canadian head offices and the direct jobs they provide for the country’s major metropolitan areas in 2018 (the latest year for which reliable data exists). Metro Vancouver is third in the number of head offices, but a distant fourth when we count direct head office jobs. Greater Toronto and Metropolitan Montreal are the dominant head office locations for large and medium-sized corporations in Canada.
Figure 1 compares the Canadian metropolitan areas by measuring the number of head office jobs per 1,000 people. Here, Metro Vancouver’s underperformance stands out starkly, as it ranks near the bottom among major cities in relative head office employment. Calgary, Toronto and Montreal score much better than Metro Vancouver on this key metric. Metro Vancouver's poor performance in head office jobs reflects the comparative paucity of large Canadian-based companies that have their headquarters in the region.
How can the size and dynamism of Metro Vancouver’s corporate head office sector be improved? Not primarily by trying to poach or lure head offices from other places, as this is difficult to do and is unlikely to pay significant dividends for the local economy. A more promising approach is to develop and maintain a policy and business environment that will support the growth of more B.C.-based companies into larger enterprises. This calls for a stepped up effort to ensure that tax and regulatory policies are aligned with the goals of driving private sector investment and business growth. B.C. must also be able to attract and retain the talent needed to allow our companies to thrive, innovate and expand.
Including Crown corporations.