Image copyright Reuters Image caption Roaring prosperity and job creation have helped make Canada an attractive destination for foreign investment
Money makes the world go round. It is an undeniable fact, but we often overlook the role it plays in influencing business decisions.
Although most Britons might be unaware, it was the UK that founded the Bank of England, laying the groundwork for the future role of central banks in our country.
Money can also be a political tool. This past weekend, Brexit Secretary Dominic Raab put forward a series of reforms to make Britain a better place to do business.
But when it comes to reducing Britain’s economic dependency on the strength of the UK’s banks and the value of the pound, there’s still a long way to go.
“Profits are going up, but wages are going down. Prices are going up, but wages are going down.”
That’s the view of Heather Scoffield, Canada’s interim-chief statistician, of the state of the Canadian economy after a decade of economic upheaval following the 2008 financial crisis.
Canada has weathered the global financial crisis much better than Britain.
The pound lost more than half its value against the US dollar, dropping to levels not seen since the early 1980s. While the Canadian dollar took a slightly more moderate tumble, to around $1.00 to the US dollar (CAD) from around $1.40 to the US dollar (CAD), it still today stands at around $1.25.
So a sterling basket of Canadian and US dollars used back in 2008, would cost slightly more than the same basket in 2018.
Image copyright Reuters Image caption Amid surging oil prices, Canada has benefited in the past decade
As a result, Canadian exporters have benefited from a strong currency, while UK-based firms with large sales in Canada have done relatively better.
And there’s more good news: with all of the R&D investment and head offices that come with British firms operating in Canada, the UK economy has become a net beneficiary of trade between the two countries.
And as part of its Brexit negotiations, Britain is looking for ways to reshape its financial system and make it more competitive internationally – perhaps by establishing a new set of business standards which would be aligned with those of Britain’s largest trading partner, Canada.
But the high Canadian dollar continues to dampen the outlook for employment in this country.
And while the Canadian economy seems to be facing a trade war in the US, major airlines and hotels are moving their manufacturing to Canada in response to high raw material prices.
Governments are making progress on a range of measures designed to attract inward investment in the Canadian dollar, from a recent “apprentice” initiative designed to make the country’s skilled labour pool more appealing to businesses to the ongoing development of the single market at a time when the number of trade barriers is on the rise.
When Ms Scoffield was elected to the post at the beginning of 2018, I asked her for her view on whether her country could persuade more businesses to shift their operations south of the border.
“I don’t know. I’ve tried. We can always tell people that it’s an easier place to do business, but with the Canadian dollar in a strong position and energy prices skyrocketing, it’s hard to see a lot of businesses looking south of the border. Not that there aren’t opportunities here in Canada for businesses to go south and other opportunities for businesses to grow in Canada.”
Perhaps as an American audience, it’s hard to fathom the economic success of the British economy with its challenge to add many more in jobs. But those same circumstances are appealing to some Canadian businesses, particularly as their economies hit skids.
Despite its gains on the global stage over the past decade, there’s no denying that the UK remains a powerful magnet for business, one which Canada must continue to remain on guard against.
If it wants to keep that competitive edge, it’ll need to find ways to add to its revenue streams, even if that involves diverting some funds away from its post-Brexit banking and financial services ambitions.
Heather Scoffield is Senior Economist at BMO Capital Markets Canada