July 8, 2022
CFA WIN! – Changes to the Canada Small Business Finance Program are now in force
After several years of advocacy, the CFA has been able to get several changes to the Canada Small Business Finance Program to better help franchisors and franchisees. These changes to the Canada Small Business Financing Regulations came into force on July 4, 2022.
Franchisee fees can now be financed under the CSBFP
Under the changes that came into force the CSBFP will allow intangible assets (franchise fees, incorporation costs, permits and licenses, etc.) and working capital costs can be financed as a term loan.
Previously these were ineligible for financing under the program and had to be paid for out of pocket of through other credit products that were offered by financial institutions.
The changes to the CSBFP give lenders and small businesses additional financing products, new class of loans, increased loan amounts and terms, improved loan conditions and decreased administrative burden.
Implementation
Now that the changes are legally in force, the banks can start to incorporate them into the financing products that they offer. Each bank will implement the changes based on its own internal roll out process that is outside of the control of both the federal government and CFA.
Click here for more information on the changes.
Support CFA’s Advocacy Efforts for 2022-23
The CFA needs your support – be active, be engaged, and we need your donation to fight for franchising and franchised businesses across Canada. By supporting CFA’s advocacy with a financial donation, you can help augment and strengthen our advocacy initiatives. you can donate directly through the CFA’s Advocacy Donation Page.
ECONOMIC IMPACT & RESOURCES
Alberta’s electricity rebate program extended until December
Alberta’s electricity rebate program has been extended by three months and will now be in effect until the end of December, the government said Wednesday.
The program was originally to provide more than 1.9 million homes, farms and small businesses with $50 monthly credits on their electricity bills for July, August and September. It will now also cover the final three months of 2022.
Those eligible for the rebate could receive up to $300 in credits until the end of December.
The program, designed to provide relief to Albertans hit hard by high utility bills, will cost the Alberta government $600 million.
Albertans who have consumed electricity within the past calendar year, up to a maximum of 250 megawatt hours per year, are eligible for the rebates, which will be automatically applied to consumer bills.
The rebates will apply to the entire bill, not just the energy portion, the government said. The rebates will be automatic and no application will be needed.
Starting October, the government will enact a natural gas rebate program until March 2023 that will kick in when prices exceed $6.50 per gigajoule.
RBC predicts Canada heading for a recession in 2023
Royal Bank of Canada is predicting this country will likely endure a “moderate and short-lived” recession next year as the economy succumbs to the pressure brought on by stubborn inflation, higher rates, and constraints in the labour market.
“This recession will be moderate and short-lived by historical standards—and can be reversed once inflation settles enough for central banks to lower rates,” economists Nathan Janzen and Claire Fan wrote in their report Thursday.
RBC’s outlook includes back-to-back annualized contractions of half a percentage point in the middle quarters of next year, before returning to growth of 0.2 per cent in the fourth quarter of 2023.
Nonetheless, Janzen and Fan warned the Bank of Canada can’t afford to take its foot off the gas in the fight against inflation.
“Though higher rates will technically push Canada toward a contraction, the Bank of Canada now has little choice but to act. … A scenario in which Canadians believe inflation will run well past the bank’s target range of one to three per cent could upend almost three decades of exceptionally effective inflation targeting policy. It could also require much larger and more damaging interest rate hikes to re-anchor prices,” they wrote.
The Bank of Canada is widely expected to hike its target for the overnight interest rate to 2.25 per cent from 1.5 per cent at its policy meeting next week. That would be the fourth time the rate has gone up this year as the central bank attempts to wrestle down inflation that is sitting at close to a 40-year high of 7.7 per cent. RBC is expecting the consumer price index will rise at least 5.0 per cent through the first quarter of 2023, and will eventually slide back into the Bank of Canada’s target range of one to three per cent in the third quarter of next year, but without quite reaching the goal of 2.0 per cent.
While a recession appears to be in the offing, RBC’s economists said they expect the unemployment rate will only rise modestly compared to past downturns as businesses are already struggling amid a “historic labour squeeze.”
That squeeze was evident earlier this week in the Bank of Canada’s latest Business Outlook Survey, which showed four out of every ten respondents said their company was facing a labour shortage, and 68 per cent said the tight labour conditions were worse than a year earlier. Those dynamics are compelling employers to pay up more for talent: 73 per cent of respondents said they’re expecting to pay higher wages over the next year, with an average pay hike of 5.8 per cent.
With unemployment sitting at a record low of 5.1 per cent as of May, RBC is estimating the rate will rise to 6.6 per cent next year as the economic downturn plays out. That rise of one-and-a-half percentage points would be small by historical standards: RBC looked at past recessions as found the unemployment rate rose as little as 0.6 per cent (in 1951-53) to as much as a seven-point surge in 2019-20).
Read the full RBC Economics Report.
Bank of Canada surveys reveal how concerning inflation is in the minds of ordinary consumers
According to two surveys from the Bank of Canada released Monday, Canadian businesses and consumers think the current era of high inflation will persist for longer than they’d previously hoped.
The two reports — known as the Business Outlook Survey and the Canadian Survey of Consumer Expectations — are the result of the central bank’s quarterly polling of Canadian businesses and consumers for their outlook on what’s happening on the ground in Canada’s economy.
While the findings differed in a few ways, the dominant theme of both was inflation and the impact it is having on buying and selling, hiring and firing.
The main takeaway from the business survey was that most businesses are seeing higher sales than they were seeing earlier in the pandemic, as economic activity is returning to some sort of normal. But demand continues to outstrip supply across almost all types of businesses, which is both a factor of and a contributor to the high inflation currently plaguing the economy.
Nearly two-thirds of businesses told the central bank they are seeing labour shortages. Nearly half — 43 per cent — say they are experiencing bottlenecks in their supply chains that are taking longer to resolve than previously anticipated.
Businesses expect Canada’s inflation rate to still be more than five per cent a year from now, and still more than four per cent two years out. But five years from now, the survey suggests they expect the inflation rate to come back to within the range the central bank targets, between one and three per cent.
It was a similar story on the consumer side. Long-term inflation expectations increased from 3.2 per cent to four per cent, while short-term expectations increased to 6.8 per cent, up from 5.1 per cent last quarter.
This survey suggests consumer spending in real terms is likely to slow in the coming months as wages can’t keep up with inflation, and households are already being forced to economize. The expectations of high inflation to come “is a source of concern for low-income consumers in particular, who are adjusting to high inflation by cutting spending, postponing major purchases, looking for discounts more often, and buying more affordable items.”
Canadian Survey of Consumer Expectations
Suburbs Lead the Canadian Office Market Recovery – CBRE
Suburban office vacancy is lower than downtown vacancy, a trend never witnessed before in Canadian commercial real estate, according to a recent report from CBRE.
Canadian office markets moved farther along the road to recovery in the second quarter of 2022, with suburban office nodes performing particularly well in most cities, the second consecutive quarter in which the suburbs have seen lower vacancy than downtown centres.
The national suburban office vacancy rate now sits 90 basis points below the national downtown vacancy rate of 16.9%, according to CBRE’s Q2 2022 Office Figures report. Seven out of 10 Canadian markets recorded tightening suburban vacancy, most often in larger magnitudes than any improvements seen downtown.
Some downtown markets performed better than others. While Toronto continued to see office vacancy inch upwards to 11.9% due to the delivery of 612,000 sq. ft. of new office developments so far this year, Vancouver built on a strong first quarter with leasing demand driving down the downtown vacancy rate by 50 basis points to 7.2%. Half of all Canadian markets reported decreased vacancy downtown, including Halifax (-80 bps), Montreal (-20 bps), Ottawa (-20 bps), and Waterloo Region (-10 bps).
Another positive sign for the Canadian office market is that the amount of sublet space, a reflection of companies changing their office use or rightsizing, fell in the second quarter. The total amount of sublet space available, 14.3 million sq. ft., is now the lowest since Q4 2020, an indication of growing confidence among businesses using office space.
Office construction levels increased in the second quarter, with over 15.1 million sq. ft. now under development nationally, with projects launching in the suburbs of Vancouver and Calgary and nearly half of that new inventory being built in downtown Toronto alone. Class A buildings have outperformed lower-quality or older-aged space, with an average vacancy rate 6.3% lower than Class B. Occupiers understand that highly personalized space with quality amenities will help to offset the drawback of a commute downtown for their employees.
“Canadian office markets are still trying to find their footing in the new world of hybrid work. Suburban office strength shows how habits and business are in flux. While there is good news, economic instability is adding to the challenges facing businesses as they attempt to map out their office requirements for the future,” says CBRE Canada Vice Chairman Paul Morassutti. “To the doomsayers out there, it is increasingly clear that office real estate still has a core purpose and value to businesses, or else we would see a far worse dynamic playing itself out by now.”
Download the Q2 2022 Office Figure reports here.
OTHER NEWS
Patrick Brown disqualified from federal Conservative leadership race
Patrick Brown has been ejected from the leadership race over allegations he broke financing rules.
The news came in a statement released late Tuesday night by the party’s leadership election organizing committee, which said Brown, who is currently the mayor of Brampton, Ont., was being disqualified from the race after “serious allegations of wrongdoing” related to financing rules.
“We regret having to take these steps but we have an obligation to ensure that both our party’s rules and federal law are respected by all candidates and campaign teams,” said the statement from Ian Brodie, head of the Conservative Party’s Leadership Election Organizing Committee, which oversees the race.
Those involved did their best to be fair to Brown and his campaign, Brodie said, giving them time to substantively refute the allegations.
“None of these problems has any impact on the integrity of the vote itself,” he said, adding the party will share the information it has with Elections Canada.
Brown’s campaign responded in a statement early Wednesday that his disqualification is unfounded and an attempt to ensure that his rival, Pierre Poilievre, wins the race. It added it would consult its legal team. The statement said the allegations are anonymous and that the campaign wasn’t given the full details of the allegations. However, it said the campaign still attempted to respond to the party’s questions and claims.
This story will continue to play out over the coming days and weeks.
Jobs Minister Ravi Kahlon’s surprise endorsement simplifies B.C. NDP leadership race
Jobs Minister Ravi Kahlon, who had been expected to run for the BC NDP leadership following John Horgan’s retirement announcement last week, announced Wednesday he would not be mounting a campaign. In a very surprising move Kahlon also endorsed Attorney General David Eby.
The two favourites to be the next Premier were David Eby and Ravi Kahlon. With Kahlon out of the race, Eby is the overwhelming favourite to become B.C.’s 37th premier.
The chatter within the BC NDP is that Kahlon had more support from outgoing Premier John Horgan’s inner circle, while David Eby had more support from the louder, more activist wing of the party, who have supported him from his time with the B.C. Civil Liberties Association.
Kahlon’s decision to back out and wholeheartedly endorse Eby makes it difficult to imagine another candidate winning, given the length of time Eby supporters have been mobilizing and the support from the potential candidate most tied to Horgan supporters.
