Mid-sized Canadian manufacturing, up in smoke – by Jeffrey Simpson (Globe and Mail – February 15, 2013)

The Globe and Mail is Canada’s national newspaper with the second largest broadsheet circulation in the country. It has enormous influence on Canada’s political and business elite.

Germany has lots of them, firms manufacturing products that get exported all over the world. These firms create domestic jobs, generate big exports, anchor communities. They are the spine of the German economy.

These companies exist in Canada, too, but there are fewer of them, even relative to the size of the economies of Canada and Germany. Their number in Canada is shrinking. Their disappearance is part of the ongoing drama of manufacturing across the Canadian economy.

In 2000, Canada had the world’s ninth-biggest manufacturing economy; in 2010, it was ranked 15th. Manufacturing tends to produce high-paying jobs, innovation and even some research. Hollow out manufacturing and the economy suffers.

The hollowing has been pronounced in recent years in the mid-sized business sector. An intriguing report from the Business Development Bank of Canada (BDC) tried to figure out how mid-sized business – defined as firms with 100 to 499 employees – were doing.

From 2006 to 2010, the BDC found, “the number of Canadian mid-sized firms decreased by 17 per cent (from 9,370 to 7,814).” Manufacturing suffered the biggest losses: From 2001 to 2010, more than half of the mid-sized manufacturing firms disappeared (the number falling from 2,807 to 1,381).

Maybe they disappeared because they got bigger? No such luck. Only 1.4 per cent grew to become firms with more than 500 employees, whereas 14 per cent went from mid-sized to having fewer than 100 employees. Not surprisingly, Ontario suffered the most from the downdraft of mid-sized manufacturing firms.

Why is all this happening? The BDC offers three plausible reasons: the parity of the Canadian dollar with the U.S. greenback, competition from China (and other places) and the brutal recession of 2008-2009.

Other reasons could be added: spotty innovation and research, inadequate access to financing for growth, an uneven record of searching for foreign (read: non-U.S.) markets.

Not all mid-sized firms disappeared or shrank. While many manufacturing ones did, the number of mid-sized retail firms increased, as did the number of firms in accommodation and food services and some dealing in business services.

For the rest of this column, please go to the Globe and Mail website: http://www.theglobeandmail.com/commentary/mid-sized-canadian-manufacturing-up-in-smoke/article8673665/?ord=1

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