MARK CARNEY 

FORMER GOVERNOR BOC, BOE

THERE IS NO RECESSION!

Canadian business, consumer insolvencies soar in 2022

Tara Deschamps, The Canadian Press

The Office of the Superintendent of Bankruptcy said Tuesday that the number of insolvencies filed by Canadian companies in 2022 was up 37.2 per cent compared with 2021 — and at least one business organization predicts that figure will keep growing.

The federal regulator's annual count found 3,402 business insolvencies last year, up from 2,480 in 2021. Business bankruptcies totalled 2,621 for the year, up from 1,942, while debt settlement proposals filed by businesses amounted to 781, up from 538 in 2021.

"I wish I could say it was a shock but we have been predicting for some time that the pandemic damage would be back-end loaded and that we would see business failures pick up, not so much during the worst of the pandemic, but following it — and that seems to be happening," said Dan Kelly, president and chief executive of the Canadian Federation of Independent Business (CFIB).

Only half of the members of his organization, which represents 97,000 small and medium-sized businesses, have seen their sales return to pre-pandemic levels, it said.

Even those that have seen a sales rebound are still facing elevated inflation and interest rates, labour shortages and supply chain challenges that have driven up costs and made operations more difficult.

When Kelly speaks with business owners, he hears the pressure they are under is "enormous" because two-thirds still have COVID-19 debt, which he says averages $114,000.

A large chunk of that debt is from the Canada Emergency Business Account, interest-free and partially forgivable loans the federal government gave to nearly 900,000 small businesses and not-for-profit organizations, he said. 

While the loans kept the businesses alive, Kelly said the repayment schedule is proving difficult to manage for many of them. 

Though the deadline was recently shifted back to Dec. 31, 2023 and the CFIB is pushing for another extension, he said many companies would need to earn above their pre-pandemic sales levels to get that cash together in time.

"Forty thousand dollars or $60,000 may not sound like a ton of money for a business, but for very small business it can make the difference if you are making decisions about your future," he said. 

"We worry it may push some of them into the column of seeing their business close or wind down."

Those most at risk are in the accommodations and food services business, he said, which the office of the superintendent revealed had the biggest increases in insolvencies in the last year, along with the construction industry. 

The sectors that saw the biggest drop were mining and oil and gas extraction, and finance and insurance.

Kelly fears the bankruptcies and insolvencies the office counted are only a fraction of the businesses which had to close. For every business that goes bankrupt, nine close through an orderly wind down or a shutdown, he said.

Even more troubling, he said, is his prediction that the closures will continue.

"I don't believe we have hit the high water mark," he said. "We are likely to see this continue to rise over the months ahead."

Along with business figures, the office tracked Insolvency filings by consumers in 2022 and found they totalled 100,184, up 11.2 per cent from 90,092 in 2021.

The consumer figures included 24,586 bankruptcies, down from 27,461 in the previous year, while proposals rose to 75,598 compared with 62,631 in 2021.

This report by The Canadian Press was first published Feb. 7, 2023.

UCP VOTE BUYING 

Alberta unveils agricultural processing tax credit to spur investment

Daniel Johnson , BNN Bloomberg

The province of Alberta is launching a new tax credit program for agricultural processing, with the intention of attracting investment in the growing sector, creating jobs and diversifying its economy. 

The Alberta Agri-Processing Investment Tax Credit will be available to the agricultural industry by the spring, according to a news release from Alberta’s provincial government on Tuesday. The province said the new tax credit attempts to capitalize on growing global demand for processed and packaged food. 

“Alberta has the fundamentals to take our value-added agriculture industry to new heights and meet the increasing global demand for food,” Alberta’s Agriculture and Irrigation Minister Nate Horner said in the release. 

Food was the largest manufacturing industry in the province in 2021, the release said, accounting for 23.8 per cent of manufacturing sales during that year. 

“The new agri-processing tax credit will ensure we have the most effective toolkit to attract large-scale agri-food projects that will help grow our industry, create jobs and ignite economic growth,” Horner said.                                                                       

 

Through the Alberta Agri-Processing Investment Tax Credit, the release said eligible companies that make a minimum capital investment of $10 million into agricultural processing will receive a 12 per cent non-refundable tax credit. 

“By offering a 12 per cent tax credit to agri-food processors making a minimum investment of $10 million, Alberta is maintaining its status as a top destination for value-added agricultural projects,” John Heimbecker, the owner of Winnipeg-based grain company Parrish and Heimbecker Ltd., said in the release. 

Food manufacturing sales reached a record $20.1 billion in 2021, hitting while the sector provided 22,400 jobs to Albertans, according to the release.

Popeyes to re-enter Chinese market with Tims China partnership

Iva Poshnjari, BNN Bloomberg

Fast-food restaurant chain Popeyes is planning to re-enter the Chinese market through a partnership with TH International Ltd, the company that operates Tim Hortons in China. 
 
The decision announced Wednesday stated the board of directors of TH International agreed to a partnership between the two franchises, which would result in Tims China acquiring the rights to the Popeyes brand in an all share transaction with the plan of expanding the franchise in mainland China and Macau.  
 
“We are thrilled to have the opportunity to welcome Popeyes, a beloved global brand and proven winner, to the Tims China family,” Yongchen Lu, chief executive officer of Tims China, said in the release. 
 
“Both brands will benefit from greater scale, a stronger financial model, and synergies, including in the supply chain and new restaurant development,” he added. 
 
The decision follows a previous attempt to launch Popeyes outlets in China after plans in 2019 to open 1,500 locations was reportedly scrapped due to the COVID-19 pandemic.
  
The transaction is subject to conditions as an audit committee oversees its completion.

Canada's Hut 8 Mining's CEO on merger with US Bitcoin

Daniel Johnson, BNN Bloomberg

The newly announced merger of US Bitcoin and Hut 8 Mining Corp will provide diversified revenue and help the combined business scale, according to the chief executive of the Toronto-based crypto mining company.

The all-stock merger was announced Tuesday in a news release and Hut 8 Mining‘s Jaime Leverton will continue to act as the chief executive officer. The combined company will be named Hut 8 Corp. and will be domiciled in the U.S. 

The move toward consolidation comes amid volatility in crypto markets. 

“We think bringing these two entities together is just going to provide an incredible amount of scale [and] diversified revenue programs, which is very on strategy for both of us independently,” Leverton said in an interview with BNN Bloomberg Tuesday.

The merger will allow the company to be more competitive and cost-effective, she said.

The combined entity will have a market capitalization of roughly US$990 million, the release said.

According to Leverton, the merger will also provide opportunities for diversification, both i terms of geography and revenue streams. 

“One of the advantages here is [that the merger is] giving us that geographic diversification. There's uncertainty in regulatory environments on both sides of the border,” she said. 

“I think it's in the best interest of our business to have diversified revenue streams [and] diversified geographies.” 

Following the collapse of FTX Group in November 2022, Leverton said interest in the crypto space is beginning to return. 

“I think we're seeing a lot of interest come back into this space [crypto], we've seen significant appreciation across the space so far in 2023,” she said.

Returning interest in the crypto industry is a sign that fears stemming from the collapse of FTX are “starting to subside a little bit,” according to Leverton.

Leverton said she believes there is an appreciation for crypto miners, similar to Hut 8, that take a “balance sheet first” approach with diversified revenue streams. 

Related

• From BlackBerry to bitcoin: How Jaime Leverton’s love of transformation got her in the C-suite
  
• We think this bear market will create an opportunity to grow the company further: Hut 8 Mining CEO
• 
  

Canadians now expect to need $1.7M in order to retire: BMO survey

Amanda Stephenson, The Canadian Press

Canadians now believe they need $1.7 million in savings in order to retire, a 20 per cent increase from 2020, according to a new BMO survey.

The eye-watering figure is the largest sum since BMO first started surveying Canadians about their retirement expectations 13 years ago. It's also a drastic increase from the $1.4 million in savings Canadians expected to need for their nest eggs just two years ago.

The results reflect Canadians' concerns about current economic conditions, particularly inflation and higher prices, said Caroline Dabu, head of wealth distribution and advisory services for BMO Financial Group.

"If you look at the average Canadian, they're feeling the rising inflation costs," said Dabu.  

“And so, not surprisingly, we are seeing that Canadians are feeling they absolutely will need more to retire."

Canada's annual inflation rate hit a four-decade high of 8.1 per cent in the summer of 2022 and has since fallen to 6.3 per cent as of December 2022. BMO Economics expects the country's CPI to decline to around three per cent by the end of the year. 

The sharp increase to Canada's inflation rate in 2022 exceeded wage gains, eroding purchasing power for most families and heightening fears about the future. The BMO survey found that just 44 per cent of Canadians are confident they will have enough money to retire as planned — a 10 per cent decrease from 2020.

But while the $1.7 million figure may sound overwhelming to working-age Canadians, Dabu said the number says more about the economic mood of the country than it does about real-life retirement necessities.

"Certainly when we’re working with clients, we find that many overestimate the number that they need to retire," she said. 

“It really does have to be taken at an individual level, because circumstances are very different ... But $1.7 million, I would say, is high."

While rising inflation may require tweaks to a retirement plan — such as contributing slightly more to savings each month if you're a young worker, or making cash flow adjustments if you're nearing the end of your working career — Dabu said these changes don't necessarily have to be drastic.

When it comes to retirement planning, Dabu said, knowledge is power. By working with a professional financial advisor and making a plan that encompasses individual circumstances and goals, Canadians can come up with their own retirement savings number.

"In the survey, we note that 53 per cent of Canadians didn't know how much they will need to retire," Dabu said.

"That increased confidence comes from knowing the exact number that I need to save for, and how I’m going to get there."

The BMO survey also found that approximately 22 per cent of Canadians plan to retire between the ages of 60 and 69, with an average age of 62. 

Millennial and generation z Canadians are the most nervous about their ability to save and invest right now, the survey found. However, all age groups — 74 per cent of survey respondents — said they are concerned about how current economic conditions will affect their financial situation, and 59 per cent said economic conditions have affected their confidence in meeting their retirement goals.

The BMO survey was conducted between Nov. 4 and 7, 2022 by Pollara Strategic Insights via an online survey of 1,500. The survey's margin of error is ± 2.5 per cent, 19 times out of 20.

This report by The Canadian Press was first published Feb. 7, 2023.

B.C. lumber industry on edge after Biden ups the ante on Buy American policies

The Canadian Pres

British Columbia's lumber industry is anxiously parsing U.S. President Joe Biden's latest Buy American language to better understand the implications for Canadian exporters. 

The B.C. Lumber Trade Council says it's "concerning" that Biden says he wants to restrict the use of foreign lumber in federally funded infrastructure projects. 

Biden announced the expanded rules during Tuesday's state of the union speech on Capitol Hill. 

The White House says it wants all construction materials for such projects, including copper, aluminum, lumber, glass, drywall and fibre-optic cable, to be made on American soil.

Council president Linda Coady says the U.S. was only able to produce about 70 per cent of its overall lumber demand in 2021, a gap she says was largely filled by imports from Canada. 

Canadian producers have long been at the centre of a decades-long trade dispute with the U.S. over anti-dumping duties it imposes on softwood lumber from north of the border.

"This is concerning and we are seeking to better understand what this means for Canadian producers," Coady said of Biden's announcement.  

"Our focus remains on working on both sides of the border to maximize the opportunity Canada has in providing the sustainably produced, low-carbon lumber products we know American homebuilders, consumers and construction workers want and need."

This report by The Canadian Press was first published Feb. 9, 2023.

Indigo latest target in string of cyberattacks on Canadian businesses

Brett Bundale, The Canadian Press

INDIGO BOOKS & MUSIC INC (IDG:CT)

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A cybersecurity incident that knocked Indigo Books & Music Inc.'s website and electronic payment systems offline is the latest in a string of cyberattacks experts say are increasingly targeting Canadian businesses.

"It's really turned into the Wild West out there and companies are struggling," Robert Falzon, head of engineering at Check Point Canada, said in an interview Thursday.

"We're going to be seeing more of these more frequently and the damage will be longer as organizations continue to struggle with the adoption of cloud technology and the explosion of artificial intelligence. Just about anybody can be a junior hacker and start creating malware."

Indigo's website has been down since Wednesday afternoon. While the book retailer can process in-store orders paid for in cash, it cannot process electronic payments, accept gift cards or handle returns.

Indigo said it's working with third-party experts to investigate and resolve the situation and hopes to have its systems back online as soon as possible.

In response to customer questions about the service outage on Twitter, the company said it's working to restore its systems and to "understand if customer data has been accessed."

Indigo also said customers who recently purchased items online may experience delays with part or all of their order. 

The Office of the Privacy Commissioner of Canada is aware of the matter and is in communication with the organization "in order to obtain more information, including a formal breach report, and to determine next steps," spokesman Vito Pilieci said in an email.

Canadian retailers have increasingly experienced cyberattacks in recent months. 

Sobeys parent company Empire Co. Ltd. recently grappled with a security breach that shut down its pharmacy services and other in-store functions. 

The cybersecurity event in early November left customers unable to fill prescriptions for four days, while other in-store functions like self-checkout machines, gift card use and the redemption of loyalty points were offline for about a week. 

Empire said in December the incident is expected to cost $25 million after insurance recoveries.

On Thursday evening, Indigo reported earnings for its latest quarter were $34.3 million, down from $45.1 million a year earlier.

Earnings per diluted share for the third quarter ended Dec. 31 were $1.22, down from $1.60 for the same quarter in 2021.

Revenues were $422.7 million, down from $430.7 million a year earlier. 

​

This report by The Canadian Press was first published Feb. 8, 2023

Related

Aspiring pilots say licence processing backlogs at Transport Canada slowing careers

Amanda Stephenson, The Canadian Press

Against the backdrop of a global pilot shortage, hopefuls aspiring to a career in the skies say their Canadian licensing applications are taking far too long to process.

Student pilots who have completed the training requirements for their private or commercial pilots' licences say their credentials are being delayed due to what they say are unacceptably lengthy processing times at Transport Canada.

Adam Sheard, a Vancouver man who hopes to become an airline pilot, completed all of the requirements for his commercial pilot's licence — a combination of ground school study and a minimum of 200 hours of flight training — in May of 2022.

After submitting the necessary paperwork to Transport Canada, he said he expected to receive his licence within a couple of months — which other pilots have told him used to be the normal wait period.

However, Sheard said he ultimately didn't receive his documentation until January 2023. 

“I finished my commercial license, and for seven months the only thing I had was my private license," Sheard said, adding the long wait meant he could not apply for a starting job at any of this country's small, regional carriers.

"If you’re trying to apply for jobs, they’re going to say we need to see your commercial pilots’ licence," Sheard said.

"I ended up taking a job as a flight instructor instead, for that very reason. I’d be working at my school, and they know I finished my CPL, and they could vouch for me.”

Sheard said early in the pandemic, Transport Canada warned aspiring pilots that processing times were taking longer than usual. While he said that's understandable, he doesn't know why — three years later — it's still taking the regulator so long to issue pilot certifications.

Colin Mackenzie, another pilot hopeful, said many trainee pilots in Canada are experiencing extreme delays with the processing of their aviation medical exams — the certificates of health that all pilots need before they can fly.

He said his own experience pursuing medical certification has been "terrible," adding that he's been waiting for months since submitting his medical data, with no response from Transport Canada.

“If you try to call them, there’s no way to speak to anyone. And even with email, it’ll be months before you hear back," Mackenzie said. 

"There’s no system in place to track your case; they don’t even have case-file tracking. It’s just like you've entered a black box, and you may or may not get a reply.”

In an email, Transport Canada spokesman Hicham Ayoun did not say whether the regulator is encountering general difficulties or delays in pilot licence processing.

However, he did say that when it comes to new aviation medical certifications specifically, wait times can sometimes exceed targeted service delivery timelines. 

Transport Canada processes approximately 60,000 applications for aviation medical certificates annually, he said, most of which are for re-issuance of existing medical certificates and are processed quickly.

But new applications take longer, and can encounter delays if additional tests or physician reports are required.

"Therefore, Transport Canada is unable to provide an average wait time for these cases," Ayoun said. 

Mackenzie and Sheard said they're frustrated by the situation not only because they believe it's slowing their career progression, but also because they keep seeing headlines about the North American pilot shortage.

Aviation analysts say the pilot labour shortage is worsening based on a variety of factors including an aging workforce, pandemic-related layoffs and early retirements, and spiralling training costs.

In January, vacation airline Sunwing blamed its spate of holiday season flight disruptions and cancellations in part on a pilot shortage, telling the federal transport committee that the government's decision to deny the airline's recent application to hire 63 temporary foreign workers (TFW) for pilot roles impacted its ability to deliver service.

Sheard said hearing about a pilot shortage while at the same time having his own career put on hold because of delayed paperwork is frustrating.

"I've heard of people waiting a year to get their licence documents. So you've got all these people waiting to get into the workforce, and then we're hearing that there's a pilot shortage," Sheard said.

A 2018 report by the Canadian Council for Aviation and Aerospace said that a third of flight operators in the country at that time cited pilots as their biggest skills shortage. The report said the need for experienced pilots was beginning to outpace the available national supply, and projected the industry would need an additional 7,300 pilots by 2025.

Ayoun said Transport Canada continues to assess human resource and training needs, and changes to the triage and assessment of files have already taken place to improve processing efficiency. 

"Transport Canada is committed to undertaking significant transformation efforts and is working to process applications as quickly as possible, without compromising safety," he added.

This report by The Canadian Press was first published Feb. 7, 2023.