Decline in machinery investment threatens Canada’s productivity, warns CFIB
According to the CFIB's research, over two-thirds of businesses said equipment costs are deterring them from investing in capital.
February 3, 2025 | By MRO Magazine
Nearly a third (32 per cent) of Canadian small businesses expect their capital investments to decrease over the next two years, according to a new report from the Canadian Federation of Independent Business (CFIB). Additionally, the report found only two in five are making investments to improve their productivity.
CFIB’s research has found that, when adjusted for workforce size, business investment in machinery and equipment declined by 16 per cent — equivalent to $1,178 less per private sector worker— between 2013 and 2023. The federation stated that this drop in investment is exacerbating Canada’s productivity challenges, which already lags behind most G7 countries.
“If we don’t improve our productivity and make it easier for businesses to equip workers with the tools and equipment they need to be more efficient, Canada risks falling behind its global competitors, losing entrepreneurs to other countries, and worsening the standard of living for all Canadians,” said Bradlee Whidden, senior policy analyst for Western Canada and report co-author. “We will all feel the impacts, that’s why governments need to act now, and fast.”
Over two-thirds (69 per cent) of businesses said equipment costs are deterring them from investing in capital, followed by the high cost of doing business (56 per cent) and cash flow constraints (50 per cent). Nearly four in 10 small businesses (37 per cent) in British Columbia, Saskatchewan, and Manitoba report that their inability to write off Provincial Sales Taxes is a barrier to increasing their investments.
To address Canada’s stagnant productivity and encourage more investment, CFIB is calling on the federal government to simplify and make the Accelerated Investment Incentive and Immediate Expensing measures permanent to allow faster write-offs, as well as abandon its increase in the capital gains inclusion rate to 66.7 per cent from 50 per cent.
Additionally, CFIB says all levels of government should:
- Reduce corporate income tax rates, allowing businesses to reinvest more of their income.
- Prioritize faster permitting, processing, and impact assessments for large infrastructure projects especially in capital-intensive sectors like energy.
“All governments have a role in tackling Canada’s productivity emergency by adopting policies that make it easier for businesses to make valuable investments,” said Francesca Basta, CFIB’s research analyst. “Providing small businesses with the financial space and tools they need will increase productivity and boost economic activity, allowing for more production and lower prices at a time when Canadians need it.”
Read the full Removing roadblocks: Unlocking small business capital investment report.