How are B.C.’s large employers faring through COVID-19? Results from our third survey

BCBC is collaborating with other business organizations to survey how companies in B.C. are managing through the COVID-19 crisis. Previous blogs discussed the results from the first survey (see Part I, Part II and Part III) and second survey.

A third survey was conducted on our behalf by the Mustel Group between May 11 to 15, 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: 38% of respondents have more than 500 employees and 26% have 50-200 employees. The surveys use voluntary response (i.e. non-random) samples.

Sales volumes continue to fall

The vast majority (60%) of respondents have seen sales volumes continue to deteriorate over the past fortnight (Figure 1). That said, compared to previous surveys, fewer firms say sales are in freefall. Slightly more respondents than in previous surveys – albeit still a minority (40%) – reported that COVID-19 was having little or no impact on sales, or that sales had slightly increased, over the past fortnight.

Figure 1

B.C.’s large employers are cancelling or deferring investments of all types, except digital

Firms were asked about the impacts of COVID-19 on their business to date (Figure 2). The most widespread impacts were decreased sales volumes and the deferral or cancellation of capital projects, marketing projects, contracts and tenders, and research and development (R&D). Around one-third of respondents are facing higher operating costs. Roughly half of firms said they had ramped up their online, digital or e-commerce activities, mostly as a survival measure. Redundancies appear more widespread, with roughly 40% of respondents having laid off staff. In a separate question, only 10% of firms said they were accessing the Canadian Emergency Wage Subsidy (CEWS, Figure 3).

Figure 2

Figure 3

Most firms support the B.C. government’s phased reopening plan

Most firms (70% of respondents) view the B.C. government’s phased reopening plan for the economy as somewhat or very helpful for their business (Figure 4).

Figure 4

Half of respondents are confident they do not require additional taxpayer support to continue operating

Businesses were asked whether they would require significant federal or provincial taxpayer support – in addition to the measures already announced – in order to continue operating (Figure 5). Only about half of respondents are confident that their business would not require additional taxpayer support to keep operating, and a further one-third of firms said it was too early to tell.

Figure 5

One-in-four firms expect their industry will take more than 6 months to recover

Firms were asked how long they expect it will take for their industry to recover from the COVID-19 shutdown. About 40% of firms said their industry was already operating at or near full capacity, and another 35% said they expect it would take less than 6 months for their industry to recover. However, a sizable proportion of firms, 25%, said they thought it would take more than 6 months to recover (of which 12% said it would take at least 6 months and 13% said it would take more than a year).

Figure 6

Conclusion

BCBC’s three member surveys of mostly large and medium-sized B.C. employers confirm that the COVID-19 shutdown is causing serious damage to the economy. We remain particularly concerned about the widespread cancellations and deferrals of business spending on capital projects, marketing projects, contracts and tenders and R&D. We also continue to anticipate large numbers of business insolvencies – mainly among small firms – and permanent closures in the coming weeks and months. Together, these developments will likely reduce the economy’s supply-side capacity going forward and slow the process of getting B.C.’s roughly 400,000 workers laid off since February back into paid employment.

Canada's pre-pandemic economy was already the 6th most indebted in the world, with national debt/GDP at 301% in 2019. A little over two-thirds of this was private sector debt (corporations and households) and the remainder was public sector debt. A lower future potential GDP growth rate will make it harder to service and repay this debt as well as the additional borrowing associated with the COVID-19 crisis.