Alberta’s Small Businesses Face Increased Costs and Slowing Economy in 2024
Mario Toneguzzi, Connect4Commerce contributor
Alberta small businesses have faced some extremely challenging times in the past few years through COVID and post pandemic. That makes more important to look to what the year ahead might bring. So, in this 2024 Alberta small business outlook, we look ahead to forecast the challenges and opportunities for Alberta’s small businesses in 2024.
2024 Small Business Outlook – Canadian Federation of Independent Business
While Alberta’s economy is more robust than the rest of the Canadian economy, there are some serious challenges ahead for small businesses.
The first challenge is the looming deadline for the repayment of the Canada Emergency Bank Account loan.
According to the Canadian Federation of Independent Business, over 900,000 small businesses are holding CEBA loans and 22 per cent are not in a position to repay at this time with the deadline set for January 18. Restaurants Canada recently also sounded the alarm saying thousands of restaurants could be on the brink of closure.
As well, the cost of business for entrepreneurs just keeps going up as the beginning of 2024 saw increases in payroll taxes for businesses and a carbon tax increase to come.
“With the increase in payroll taxes (EI and CPP) on January 1, this is not a good start to 2024 for small businesses. This is all the more reason for Ottawa to reduce the cost of doing business and alleviate some of the cost pressures facing small firms. The federal government can start by returning the $2.5 billion in carbon tax revenue it promised to small businesses as soon as possible,” said Corinne Pohlmann, Executive Vice-President of Advocacy at CFIB.
“(Payroll tax is) a significant increase in the cost of labour for employers and puts them in an even tougher position, especially when many employees will be looking for a salary increase at the beginning of the year. Business owners may be forced to rethink their wage and hiring plans for 2024. And that is over and above other cost pressures small businesses are dealing with right now, such as the looming Canada Emergency Business Account repayment deadline.”
Franco Terrazzano, Federal Director of the Canadian Taxpayers Federation, has quantified the impact of those payroll tax increases.
An employer is forking over $5,524 per employee in the new year.
Terrazzano said it’s very difficult for small businesses these days with all the taxes, including the carbon tax.
“It just continues to layer on layer on costs,” he said.
According to the CFIB, heading into 2024, most small businesses (77 per cent) want governments to focus on addressing rising prices and the cost of doing business, while another 74 per cent want governments to reduce the overall tax burden. If governments reduced the overall tax burden, over half (57 per cent) of small businesses said they would increase employee compensation such as wages and benefits.
But despite the challenges the latest Business Barometer published by the CFIB shows that business confidence in Alberta improved in December and remains above the national average.
Alberta 2024 Small Business Outlook – ATB
Alberta Economy – Weaker but still Robust for 2024
“After a bit of a stumble in November, the long-term optimism index is based on how businesses expect to be performing in 12 months while the short-term optimism index is based on a three-month outlook,” said Rob Roach Deputy Chief Economist and Managing Director at ATB Financial.
“The long-term index for Alberta rose 4.3 points to an even 50 in December, down from the recent high of 59.4 in August and below last year’s average of 53.6. December’s reading means half of Alberta’s small business owners are expecting their business’s performance to be stronger in 2024 with the other half expecting it to be weaker.”
In a research note, Roach said if the first economic shoe to drop was the Bank of Canada’s aggressive series of interest rate hikes that began almost two years ago, we are now waiting for the inevitable other shoe in the form of the full impact of higher borrowing costs on the economy.
“The slowdown began last year, and we expect national GDP growth to be anemic well into 2024 before things start to bounce back later in the year. We might avoid slipping into recession, but relatively high debt levels, the cumulative impact of elevated inflation, and looming mortgage renewals spell trouble for a lot of Canadian households. Alberta can’t escape the negative consequences of tight monetary policy, but as our recent Alberta Economic Outlook shows, our economy is expected to do relatively well compared to the country as a whole,” explained Roach.
ATB expects the Alberta economy to slow to 2.1 per cent real GDP growth in 2024 before picking up again to 2.7 per cent in 2025.
Alberta to Outperform the Rest of Canada
The forecast said the good news is that Alberta is entering 2024 in relatively good shape and is expected to remain one of Canada’s growth leaders. Alberta consumers have kept spending and job growth has been brisk. As a major energy producer, higher commodity prices have lifted incomes and supported higher levels of capital spending in the province, it said.
“We attribute Alberta’s continued outperformance to three factors,” said ATB:
- A revitalized energy sector – The oil and gas sector staged an impressive comeback in 2022 and 2023 and that momentum is carrying into (2024). Improved market access along with healthy prices will drive additional economic activity.
- Population growth – The population is expanding at a faster clip in Alberta than any other province due to strong gains in interprovincial migration. We expect those interprovincial inflows to continue, albeit at a more modest pace, supporting the housing sector and consumer spending.
- Emerging sectors – Alberta is seeing growth broaden, with expansions in a number of sectors including biofuels, petrochemicals, hydrogen, food manufacturing, aviation, and technology.”
Alberta 2024 Small Business Outlook – TD Economics
Alberta continues to be insulated, though not immune, to the broader macroeconomic headwinds facing the nation as a whole. The province will still benefit from a supportive commodities backdrop, durable population gains, and relative housing affordability, but the impulse from these tailwinds will start to fade into next year. With real GDP forecasted at 2.2% in 2023 and 1.4% in 2024, Alberta keeps its spot near the top of the provincial growth charts.
The impacts of wildfires and shutdowns for maintenance earlier this year temporarily stunted activity in Alberta’s oil sector. But the production rebound since July has been swift, as expected, (Chart 1) and positions the energy sector to advance at a modest pace this year. The stage is also set for a solid showing in 2024, especially as the Trans Mountain Pipeline is slated to be operational by the mid-way point of the year. The extension will nearly triple export capacity out of the region and unlock access to new international markets.
Alberta’s Oil Industry Outlook
The Alberta government kept its estimate for WTI at $79 /bbl for the year in its mid-year fiscal update, while forecasting a narrower spread for the WTI-WCS differential at $17 (previously $19.50). These projections are reasonable, even in the wake of oil price volatility that has seen prices dip to around the $70/bbl level in recent weeks. Non-renewable resource revenues continue to drive improvements in the budget balance and the outlook for prices to hold within the US$70-$80 range in the near-term is still supportive of healthy public finances.
Alberta’s Housing Industry Outlook
Outside of oil and gas, investment in non-residential building construction is gaining momentum despite higher borrowing costs. Similar momentum is taking place on the residential side, led by an impressive 35% increase in housing starts since April. Relatively tight resale markets will be instrumental in driving another year of outsized residential investment gains in 2024.
Elevated population growth this year has added significant fuel to the province’s economic expansion. Alberta is likely to remain a magnet for many international and domestic newcomers in light of its relatively affordable housing market and prospects for continued economic outperformance. However, we still anticipate some moderation in domestic conditions as gains in the overall headcount and job creation slow from 2023’s unsustainable pace, while the highly indebted consumer-base will continue to feel the pinch from this year’s run-up in interest rates.
Mario Toneguzzi is a regular contributor to the Connect4Commerce Canadian Small Business News Blog. Mario is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and the only Canadian to be named.)