This indicates ‘potential stark productivity problems continuing and potentially worsening in the future’
A researcher is warning that Canada’s productivity problem will continue and may even worsen in the future due to low business investment.
Canadian investment grew so slowly between 2018 and 2025 that it was barely enough to offset the depreciation of existing plants, machinery and equipment, according to a new Fraser Institute study.
The study, Capital Investment by Province: An Update, found Canada's net stock of non-residential capital grew by an average of just 0.99% annually from 2018 to 2025.
That compares with 1.1% average annual growth from 2014 to 2018, and 2.4% from 1990 to 2014, according to the report.
Author Steven Globerman, a senior fellow and Addington chair in measurement at the Fraser Institute, said the investment category is central to productivity. "Business investment in non-residential assets such as plants and factories, machinery and equipment, and computer technology is crucial for improving worker productivity and ultimately living standards," Globerman said.
Three energy provinces see declines
Alberta, Saskatchewan and Newfoundland and Labrador were the only provinces where the value of non-residential capital stock fell in real terms between 2018 and 2025.
Alberta's non-residential capital stock declined by an average of 1.05% annually, followed by Newfoundland and Labrador at 0.67% and Saskatchewan at 0.44%, according to the study.
By contrast, British Columbia, Ontario and Quebec posted faster non-residential investment growth from 2018 to 2025 than from 1990 to 2014, with British Columbia's stock growing 4.19% annually, linked partly to LNG and pipeline construction.
Non-residential capital stock (business investment) — average annual % change
|
Province |
1990–2014 |
2014–2018 |
2018–2025 |
|
Canada |
2.4 |
1.1 |
0.99 |
|
British Columbia |
2.4 |
1.5 |
4.19 |
|
Alberta |
4.4 |
0.1 |
-1.05 |
|
Saskatchewan |
3.3 |
1.3 |
-0.44 |
|
Manitoba |
1.8 |
2.8 |
0.11 |
|
Ontario |
1.5 |
1.7 |
1.87 |
|
Quebec |
1.5 |
0.6 |
1.81 |
|
New Brunswick |
1.4 |
0.1 |
0.19 |
|
Nova Scotia |
0.7 |
0.4 |
0.61 |
|
Prince Edward Island |
1.9 |
0.2 |
2.9 |
|
Newfoundland & Labrador |
3.1 |
6.0 |
-0.67 |
Investment per worker falls
The study also compared capital growth against employment growth, finding that 8 of 10 provinces saw employment outpace non-residential capital investment from 2018 to 2025 .
That means business investment per worker declined in most of the country over the period, according to the report. Alberta recorded the steepest drop in investment per worker, averaging a 2.8% annual decline, followed by Saskatchewan at 1.9% and Newfoundland and Labrador at 1.5%.
"The national decline and pronounced declines in several provinces in the value of business investment per worker indicates potential stark productivity problems continuing and potentially worsening in the future," Globerman said.
Per-worker investment (where employment growth (right-hand columns) exceeds capital growth (left-hand columns), investment per worker is falling; where capital growth exceeds employment growth, it's rising)
|
Province |
Capital growth 2014–18 |
Employment growth 2014–18 |
Capital growth 2018–25 |
Employment growth 2018–25 |
|
Canada |
1.1 |
1.29 |
0.99 |
1.79 |
|
British Columbia |
1.5 |
2.61 |
4.19 |
1.38 |
|
Alberta |
0.1 |
1.07 |
-1.05 |
1.74 |
|
Saskatchewan |
1.5 |
0.53 |
-0.44 |
1.49 |
|
Manitoba |
2.8 |
1.21 |
0.11 |
1.29 |
|
Ontario |
1.7 |
1.46 |
1.87 |
2.27 |
|
Quebec |
0.6 |
1.2 |
1.81 |
1.47 |
|
New Brunswick |
0.1 |
0.22 |
0.19 |
1.43 |
|
Nova Scotia |
0.4 |
0.77 |
0.61 |
1.72 |
|
Prince Edward Island |
0.2 |
0.27 |
2.9 |
3.23 |
|
Newfoundland & Labrador |
6.0 |
-0.81 |
-0.67 |
0.85 |
A previous Capital One report noted that 51% of Canadian professionals surveyed said that their employers have focused most of their resources – and exclusively in some workplaces – on new technological tools, compared to just 11% who said the focus has been mostly or exclusively on employee development.
Residential investment slows slightly
Meanwhile, Canada's residential capital stock, tracked separately from business investment, grew by an average of 2.46% annually from 2018 to 2024, down modestly from 2.8% between 2014 and 2018, according to the Fraser Institute report.
New Brunswick, Nova Scotia and Prince Edward Island were exceptions, posting faster residential growth in the later period, attributed partly to stronger population growth.
Alberta and Saskatchewan saw the sharpest residential slowdowns, with Alberta's 2018–2024 growth rate falling to 63% of its 2014–2018 rate and Saskatchewan's to 60%, according to the study.
Globerman said policymakers should treat the findings as a call to action. "Given the importance of business investment to improvements in the Canadian living standard, policymakers must prioritize policy reforms to make the country more attractive to private business investment," he said.
Business investment per worker in Canada declined from 87.3% of the U.S. level in 2014 to 54.0% in 2024, the Fraser Institute previously reported.
