BCBC is collaborating with other business organizations to survey how firms in British Columbia are managing through the COVID-19 crisis. Previous blogs discussed the results from the earlier surveys (see first survey Part 1, Part 2 and Part 3, the second survey and third survey).
A fourth survey was conducted on our behalf by the Mustel Group between July 6 to 13, 2020. This blog examines the latest responses from BCBC members who participated in the survey. The majority are large and medium-sized employers operating in B.C. across a range of industries: 43% of respondents have more than 500 employees and 40% have 50-200 employees. The surveys use voluntary response (i.e. non-random) samples.
Sales volumes have begun to stabilize or increase for some firms, but not all
In previous surveys, reports of significant sales volume declines were ubiquitous across firms. The latest survey finds that more than half of respondents have seen sales volumes stabilize or increase over the past fortnight. Still, a significant share of around 42% of firms (albeit far less than the 60% in our previous survey) have seen falling sales volumes over the past fortnight, including 5% of firms who saw sales decline by 50% or more.
Firms are reducing current and future productive capacity
Firms were again asked about the impacts of COVID-19 on their business to date (Figure 2). Other than declining sales volumes, the most widespread impacts were the deferral or cancellation of projects related to capital investment, marketing, contracts and tenders, and research and development (R&D). Roughly half of firms said they had ramped up their online, digital or e-commerce activities, mostly as a defensive measure. Around one-third of firms have incurred higher operating costs. Slightly more than one-third of firms said they were either laying off staff or reducing staff hours, whilst only 10% said they were either hiring staff or increasing staff hours. Overall, the data suggests that employers are reducing current and future productive capacity due to dwindling demand and higher operating costs.
While B.C. firms generally support the public health strategy, confidence in the province’s economic strategy is low
In our previous survey, respondents were broadly supportive of the B.C. government’s Restart Plan. Almost 70% of BCBC members who responded to our survey viewed the reopening plan as somewhat or very helpful to their business. The plan sets out the public health conditions that allow a phased restart of societal and commercial activities. On June 24, the province moved to Phase 3 which, for example, no longer discourages intra-provincial travel, permits domestic tourism operations, and allows for the gradual reopening of in-class K-12 education.
However, the plan is limited to the removal of the government’s necessary prohibitions and discouragement of activities to contain the spread of COVID-19. It is a public health strategy for the economy. It is not an economic strategy to stimulate a recovery in GDP, hiring and investment.
In the latest survey, BCBC members were asked about their level of confidence in the province’s economic strategy (Figure 3). Very few respondents (16%) are confident that the provincial government’s economic strategy will help their business through the COVID-19 period (of which only 2% were very confident and 14% were somewhat confident). Around 53% of firms said they were not confident that the province’s economic strategy will help their business
(of which 25% were not at all confident and 28% were somewhat not confident), and a further 28% of respondents were unsure or neutral about its impact.
Firms were asked about their top strategic priorities for an economic recovery (Figure 4). More than half of respondents cited the need to create better conditions that attract private sector investment to the province so as to create jobs. A significant number of firms cited the need to reduce bureaucracy by making regulations more efficient, simpler, and more predictable. The next highest priorities were the need to reduce tax and fee burdens, public funding of large transport and trade-related infrastructure projects, and public funding of general infrastructure projects such as hospitals and schools. Few firms thought direct cash flow support or eliminating the employer health tax (EHT) were priorities. Overall, firms are most concerned about B.C.'s tax and regulatory settings that could discourage new private sector investment and thereby hamper a recovery in economic activity and employment.
BCBC’s four member surveys of mostly large and medium-sized B.C. employers indicate that the COVID-19 pandemic has wrought serious damage to the provincial economy. The economy appears to have begun a tepid and stuttering recovery out of a deep hole. Over the past fortnight, fewer firms have seen outright sales declines, and more than half have seen sales volumes stabilize or, in some cases, increase.
Nevertheless, all four surveys consistently indicate that, because of weak demand and higher operating costs, employers are reducing current and future productive capacity. Many businesses report having deferred or cancelled capital investments, marketing, R&D and other projects (except digital projects), and/or reducing staff numbers or hours.
Most employers in our survey lack confidence or are unsure or neutral about whether the provincial government will deliver an economic recovery strategy that helps their business succeed through COVID-19. For firms, the top strategic priorities are to improve tax and regulatory settings that discourage new private sector investment needed to recover pre-pandemic levels of GDP and employment. Other priorities include the funding of infrastructure projects related to transport and trade, and also hospitals and schools.