Is institutional memory holding back New Brunswick’s growth potential?

One of the challenges of the modern time is the lack of long term planning.  It was not uncommon in the 1950s and 1960s for businesses and governments to have multi-decade plans.  Some capital intensive industries (e.g. power generation) would routinely have 50 year business plans.  That all changed in the 1970s and 1980s with the rise of high inflation, policy changes that broke up large firms and engendered more competition and other factors.

Sometimes it is good to take a long term look backwards so we can get some perspective on a long term look forward.  JM Keynes once said in the long term we are all dead.  While that may be true for the individual it is not true for the city or province or country.

Take a look at New Brunswick’s population over a 90-year period.  Essentially slow and steady growth over an impressive 6+ decades – with a little dip around WW2.  However, starting around the early 1990s the population stagnated around 750,000 and remained there for an equally remarkable 20+ years.  It has started to tick up slowly since and is now closer to 780,000.

Contrast this with the country overall.  Just a straight line solid growth rate from WW2 onward.  When David Foot fretted about demography, the federal government just ratcheted up immigration.

Contrast New Brunswick’s slow but steady growth and Canada’s strong and steady growth with Saskatchewan. I’m not a historian but I’m going to go out on a limb and link this to the province’s heavy reliance on agriculture, minerals and more so recently oil and gas.  But you can see this whipsaw up and down in the data going all the way back to the 1920s.

It seems to me institutional memory is an interesting thing.  It may explain why New Brunswick politicians, bureaucrats and policy makers are so bearish on our growth prospects over the next decade and beyond and Saskatchewan politicians, bureaucrats and policy makers are so bullish on their future over the next decade.

New Brunswick has no history of big comebacks.  Slow but steady growth through the 1950s before settling into a period of declining growth rates until outright decline and now relative population stagnation.  If you were a politician, bureaucrat or policy maker do you have any historical evidence New Brunswick is in for a big swing back to 10% or 15% growth in the next decade?

Contrast that with our friends in Saskatchewan.  When Premier Moe came out with the 2030 Growth Plan recently it was met mostly with kudos in his home province (a little more skepticism outside).  It calls for the province to grow its population to 1.4 million by 2030 and add 100,000 net new jobs.  That is nearly 19% population growth over 11 years. But look at the chart below.  Which province is more accustomed to big swings in population (and hence economic growth)?  Now the pessimist would look at the chart for Saskatchewan and say it is due for another decade of decline – based on history. But not Premier Moe.  He’s on a growth kick.

In practical terms, New Brunswick’s population trajectory since the 1950s means we aren’t accustomed to periods of rapid growth.  Our universities and colleges aren’t hardwired for growth. Our municipalities for the most part aren’t hardwired for growth.  Our decision makers are not hardwired for growth.  Our infrastructure planning is not hardwired for growth.  If you don’t believe me take a look at NB Power’s growth forecasts.

So along comes Campbell, et. al. waving arms and demanding growth of 15% or so over the  next decade driven by a massive increase in immigration.

But we have no history of it.  No institutional memory of it.  No planning precedents.  No history of rapid infrastructure expansion. And, most importantly, no history of flowing in tens of thousands of newcomers.

So can we break with historical inevitability?

 

Posted in Uncategorized | Leave a comment

Can you imagine? In the near future boats could be made from wood!

There is a great article in the Economist this week about giant 3D printers.  In Maine researchers printed a fishing boat in 72 hours. But what was really interesting is that they are looking in the future to print the boat with wood fibre.  Imagine.  In the near future we could be building boats with wood.

A couple of things struck me about this article.  One, why am I not reading about New Brunswick research in the Economist?  Either a) we don’t have any R&D worthy enough (unlike Maine?) or b) we don’t promote it in ways that it would get covered by the Economist.  I hope it is not the former.

The more important observation is about the wood pulp.  Despite the many stories I read in Facebook about the decimation of New Brunswick’s forests, the province is still among the most forested jurisdictions in North America (and well beyond).  And there is enough replacement every year to ensure there will be similar level of wood harvest in perpetuity. So, logically, it would seem our researchers should be looking at innovative and high value uses for wood.  I know AV ships wood pulp to make clothing in China but I am curious if our researcher (firm or university) are looking at other uses – 3D printing is an interesting one.

Research investment, at least conceptually, should be aligned with other industrial strengths.  We have lots of wood, fish, blueberries, maple syrup, etc. – is our R&D strategy aligned?  A few years ago I wrote about my search to determine if anyone in New Brunswick was doing research on the health properties associated with maple syrup (and other uses).

There was.

In New Brunswick, New Jersey (at Rutgers University).

I’m not saying government should only support research in areas where we have other industrial strengths.  BioNB is doing interesting things in with hemp, for example.  However, it seems that alignment of R&D investment in ways that strengthen the value proposition for billion dollar export industries, at least makes some sense.  This isn’t restricted to natural resources.  I never could figure out why we don’t have more R&D related to the business support services industry.  It’s a billion dollar export industry for New Brunswick and I don’t think there is anything going on in academia to support it.  We have had a few very interesting private sector firms develop products to support the industry.

 

 

Posted in Uncategorized | Comments Off on Can you imagine? In the near future boats could be made from wood!

Setting government targets? To paraphrase Meghan Trainor, its all about the base (line)

I received several calls and emails this week about Saskatchewan’s new 10-year growth plan.  In case you didn’t see it, as described by the CBC the growth plan “includes goals of increasing the population by 226,000 and creating 100,000 more jobs by 2030”. Oil output is going to rise, agriculture exports will boom, immigrants will flow in and young people stay home with mom and dad.

In case you were wondering that is a 16% growth in the population and a 15% growth in total employment (over 2018).

The inquiries to me were asking about New Brunswick’s plan.  New Brunswick has more modest growth ambition. In August, a population growth strategy and action plan was launched under which the province is hoping to attract up to 7,500 newcomers annually by 2024.  That is not exactly the same as a population growth strategy because population growth comes from more than just immigration (births less deaths, interprovincial migration).  At this immigration target level New Brunswick’s population will likely grow by 2024 – but it will be modest growth.

How can Saskatchewan have such audacity?  There were 162,000 people employed in the province over the age of 55 in 2018.  They will all need to be replaced in the next decade or so, 162,000 replacements and net growth of 100,000 – so over 300,000 net new workers required in 10 years.  In a province not that much larger than New Brunswick.

The audacity.

Back to Meghan Trainor. She tells us it’s all about the base and not the treble.

For the province, it is all about the base (line) (and a little about the treble).

Saskatchewan has been booming.

Between 1985 and 1997, the Saskatchewan workforce did not grow and the economy was relatively stagnant.  There were the same number active in the labour market in 1997 as back in 1985 – an amazing stretch of 12 years.  During that same period there was a massive increase in the number of young Saskatchewanians entering the labour market  – but thousands of them left every year and as the province was in a prolonged funk.

By contrast, New  Brunswick added a net 46,000 to its workforce between 1985 and 1997.

Since 1997 Saskatchewan’s workforce has surged by a net 114,000 people.  It’s economy has boomed from oil, agriculture and minerals (mostly).  Sure the last few years have been choppy but the new growth plan aims to right the ship and bring the province back to the halcyon days during the first 15 years of the of 21st century.

So, the baseline in Saskatchewan is high.  People are used to robust growth.  Their cities and towns are filling up with immigrants.  They want more.

So the Premier is giving them a plan.

And, importantly, Premier Moe is banking on a few key industries to drive growth.  It is not as clear what those industries might be in New Brunswick.

In New Brunswick, we have just got back to very modest population growth in the past couple of years and the provincial workforce is still shrinking.

The baseline is low.  Getting back to modest growth in population and arresting decline in the workforce would be better than we have seen in the past decade.

As for growth industries?  No one wants to dig holes.  There isn’t much additional wood to be harvested. People are getting more cranky about aquaculture. I’ve said before because we don’t have that one big game changer we may have to bootstrap it – more maple syrup, more agriculture, more business services, more IT, more professional services, more tourism, more manufacturing – a trickier economic development model than relying on a few big industries for growth.

And harder to predict.

So we get more pragmatism and less audacity.

But the books are balanced.  Folks are mostly comfortable these days.  Not much of a burning platform (or iceberg if you are so inclined).

 

 

 

 

 

 

Posted in Uncategorized | Comments Off on Setting government targets? To paraphrase Meghan Trainor, its all about the base (line)

The Brunswick Smelter closure: An absolute tragedy

The closure of the Brunswick Smelter announced today is a tragedy.  For those of you who say good riddance, don’t kid yourself.  The smelting will be done elsewhere – possibly in jurisdictions with less environmental standards than New Brunswick.  All we have done is removed $90+ million worth of labour income from northeastern New Brunswick, upwards of 1,200 jobs with direct, indirect and induced effects included and one of the top exporters for northern New Brunswick.  In the past 10 years, the smelter exported $1.7 billion worth of product around the world.

NB Power loses one of its largest customers ultimately meaning higher rates for other customers.

The Port of Belledune loses one of its top customers.

Hundreds of small businesses in the supply chain and those benefiting from the spending of the $90+ million in labour income will be hurt – many will go under.

In my opinion that smelter was more important to the regional economy up there than the automobile industry in southern Ontario.

When I was in government we were trying to get a long term investment that would have saved the smelter for a generation and made its operations more environmentally friendly and energy efficient.

The largest employer up there now?  The hospitals.

I hope the unions didn’t trigger this.  The average age in the plant was pushing 50 years.  A lot of guys will go home with a severance and pension.  The young guys/gals and the next generation not so lucky.

Posted in Uncategorized | Comments Off on The Brunswick Smelter closure: An absolute tragedy

Is New Brunswick’s IT trade deficit limiting GDP potential?

Herb Emery offers another insightful column today questioning why we haven’t seen much growth in ICT (information and communications technology) GDP despite all the hype.  He contrasts New Brunswick with Nova Scotia and PEI and doesn’t find a favourable trend.

One of the obstacles in analyzing the ICT industry is the ‘C’ which accounts for at least 65 percent of total ICT GDP.  The ‘C’ is communications – or telecommunications – which is mostly a local service (your phone, cell phone, etc.) so that very large component is basically correlated to general population growth (and the industry’s ability to sell us more and more services, my ‘phone’ bill now is $355/month and includes a landline, high speed Internet and it seems 5,000 TV channels on demand.

But even with telecommunications removed, IT GDP growth in New Brunswick has been very weak in recent years.

I think the import/export data for the sector tells a big part of the story.  We only have interprovincial and international import/export data through 2016 but it still helps illuminate something that is going on.

The value of New Brunswick IT exports* has been on the rise – 2016 seems like an outlier but the total value was $321 million up from $193 million in 2010.  That is a 67% growth rate between 2010 and 2016 (if the 2016 export level holds in subsequent years it does look like exports are rising).  This is comparable to Nova Scotia but less than PEI.

The challenge is that IT imports are dragging down GDP potential in New Brunswick.  The increase in the value of IT imports was much faster than IT exports and now the value of IT imports is more than double the value of IT exports leaving a $339 million trade deficit in IT.

New Brunswick imported $79 million worth of general purpose software, $90 million worth of data processing, hosting, and related services, $165 million worth of custom software design and development services and a whopping $326 million worth of computer systems design and related services (except software development) in 2016.

Compared to Nova Scotia New Brunswick has a much larger IT trade deficit (NB has 49 cents worth of IT exports for every $1.00 of IT imports compared to 60 cents in Nova Scotia).

This shows you the complexity of economic development.  Even the IT industry is highly trade exposed.  Strong growth in IT exports that doesn’t outpace the growth in IT imports will still lead to weak IT GDP growth – and all the economic value that comes from that (high wage jobs, income, taxes, consumer spending, etc.).

What’s the right response?  Well if we had the capacity to properly analyze our economy, we would try and figure out what is actually in that $660 million worth of IT imports and see if there is any potential for a) NB firms to address that market opportunity or b) attract national and international firms to do the work here.  Please note I am not suggesting we offer subsidies to IT firms to do the work here.  I’m just suggesting if we knew what was in the $660 million (or the $300 million increase since 2010) we would at least have the right data for a potential response.

Because of the rising IT wages in New Brunswick and the tightening IT labour market it may now be cheaper to import IT services than to use local suppliers.  If, and I emphasize if, that is the case, wouldn’t you like to know?

By the way, a friend of mine recently noticed the Rogers installation guy’s truck had an Ontario license plate so he asked the guy about it.  Rogers hired a team of installers from Ontario to come down to the region to do the work.

If there aren’t enough local workers to do basic cable and Internet installs, that should make us stop and think.

 

*IT exports includes:
General purpose software [MPS511200]
Data processing, hosting, and related services [MPS518000]
Custom software design and development services [MPS541501]
Own-account software design and development services [IMS541502]
Computer systems design and related services (except software development) [MPS541503]

Source: Statistics Canada. Table 12-10-0101-01 Interprovincial and international trade flows.

Posted in Uncategorized | Comments Off on Is New Brunswick’s IT trade deficit limiting GDP potential?

Sour Grapes: Did we miss an opportunity?

Canada’s Defence Minister, Harjit Sajjan, got this one right.

On Saturday, Canada’s grumpy coach/commentator Don Cherry, lamented the lack of people wearing poppies and went on to make a snarky comment about immigrants.

Of course this led to the now obligatory calling out of Cherry on social media – each denunciation more louder than the last – he should be sanctioned – he should be fired – he should be investigated for hate speech – and many with colourful language – and to be clear not just us regular Joes and Janes.  Many top journalists and commentators felt obliged to take down the man in pithy tweets.  Poor Ron MacLean – his facial features studied with great granularity and I see now that he has come out with a mea culpa moment – again obligatory in the woke world – he may not survive this.

I was disappointed with the general response.  Sure, Don Cherry – old Grapes – who has carefully constructed his grumpy – tell it to ’em straight brand for more than 50 years – needs to be called out for this silly comment but what this really should have been about is the sentiment behind the statement and it should have induced a conversation.  This is why Sajjan got it right.

It is important to talk with newcomers about important symbols and why they matter so much to many (most) Canadians.   Many will embrace these symbols and some will not – just like all the rest of us – those living here weeks and those whose families have been here for generations.  This is Canada, this is an open and free place – over the years I have heard several Canadians denounce poppies as a symbol of war and death that should not be part of our culture.  I would suggest they are in the tiny minority but they exist (just do a quick search on Twitter now if you don’t believe me).

I spoke at the pre-conference during Pathways to Prosperity recently and proposed the radical idea that not everyone with questions about immigration is a racist.  That is not to suggest there are no racists but I am of the opinion that most Canadians are decent and open people but that some have questions about why we need to attract immigrants, what are the reasons people move here, will they ‘take our jobs’, how will they impact our ‘culture’, etc.

I say bring on these questions. If people suppress them for fear of being shamed in our woke world or if they retrench back into cloisters of like minded, this will only hurt our broader objective of fostering an open and tolerant society that welcomes newcomers and realizes their importance to our future as a country.

So, back to Sour Grapes.

He is well-loved by millions of Canadians.  I fear this becomes another George Bush “you are either with us or against us” moment.  If you still like Cherry now after this you must be a racist.

I believe you can still like Don Cherry and not be a racist and I don’t care if I get named and shamed for this view.  A bully is a bully.  If you are trying to get Canadians to keep quiet for fear of being shamed, you might feel good but you will not move society forward.

If Don has questions about immigration, let’s have a conversation.   The folks at CBC (SportsNet?, TSN?) should use this as a teachable moment.  Maybe Don could start doing a few spots on the Punjabi version of Hockey Night in Canada.  He might find they are just as passionate about hockey as he is – and they may even like Dougie Gilmour.

I hope we didn’t miss a moment here.

 

 

Posted in Uncategorized | Comments Off on Sour Grapes: Did we miss an opportunity?

The reasons people leave their jobs: You might be surprised

In preparation for the big workforce summit next week I have been crunching a ton of labour force data.  If you haven’t registered for the summit, I think it is closed but you might try to find a way as it is going to be informative and fun (if you think labour market data is fun, that is).

Statistics Canada asks people in the monthly Labour Force Survey why they left their jobs.  They ask the unemployed (or those not active in the workforce but who had left a job in the past 12 months) for the reason they left the job during the previous year.  I took a look at the answers going all the way back to the 1970s to see if there were any interesting trends.

At first I looked at the October data (i.e October 2019, 2009, 1999, etc.) to ensure a consistent month over the years but I changed my mind and went with the average monthly data for each year just to ensure there wasn’t anything wonky going on in a specific month (this is the unadjusted LFS data for New Brunswick).

There are some interesting trends in the data.  First, the size of the labour force ballooned in the late 1970s and 1980s (at least by NB standards) rising 21 percent over the decade.  The next two decades it expanded by roughly the same growth rate but in the past decade, the labour force has shrunk (as I have been reporting on these pages for years).

There are two broad categories of why people left their jobs – they voluntarily left or they were let go.  Among those who voluntarily left, there has been an ongoing decline – which may seem counter-intuitive for those who worry about the feckless Millennials. In an average month in 2018, 2,700 said they left their job in the past 12 months because they were ‘dissatisified’ down from 3,400 in 2018 and 3,900 back in 1988.

There has been a 30 percent decline among those leaving to go back to school while there has been a 30 percent increase in the number retiring over the past decade – no surprise in this data.

The most interesting data relates to the job losers.  There has been a steady decline in the number and share of persons getting permanently laid off from a high of nearly 53,000 in an average month in 1998 (again note the definition – the reason they left a job in the past 12 months) to only 29,500 in 2018.  This is a steep decline (44 percent in the past 20 years and points to both economic and demographic factors).  The bottom line is that people are far less likely to be laid off now then they were in previous decades – although I wonder about Employment Insurance in here – because the ‘temporary layoff’ numbers seem low given the high EI rate which always clouds New Brunswick’s labour market picture.

The number that haven’t worked at all in the past year is rising steadily – likely due to the aging workforce.  In an average month in 2018 there were 188,900 folks who said they didn’t work at all in the previous 12 months.

Of course it wouldn’t be an It’s the Economy, Stupid! blog without comparing the data to other jurisdictions.  The following chart shows the percentage change from 2008 to 2018 in the total number of people leaving their job in the past 12 months by reason.  I wanted to use the absolute number change (rather than the change in the percentage breakdown) because I am interested in the effects of the strong growth in the national workforce over the decade (up nearly 20 percent).

The national data is fairly similar to the New Brunswick data with a few interesting variances.  First, there has been a significantly lower decline in the number leaving a job to go to school nationally compared to New Brunswick (down 7 percent compared to down 30 percent in New Brunswick) – I suspect this has to do with the significant increase in younger immigrants moving to Canada over the decade (and other factors).

Second the number leaving because they retired expanded faster than in New Brunswick.   We know lots of people are retiring, we just need to make sure there are enough folks to take their place in the workforce and ensure there are enough to meet the growing demand of certain industries.

The big increase in the number nationally who have never worked is interesting.  I’m not sure why this number is expanding.

Posted in Uncategorized | Comments Off on The reasons people leave their jobs: You might be surprised

NB government’s economic dashboard: A good first step

The New Brunswick government’s Economic Dashboard is nice – it covers a lot of interesting data points.  I hope it sticks.  The Lord government also published an economic scorecard that was supposed to be a report card on the economy but when the numbers looked bad they started to cherry pick only good stats and then stopped publishing it altogether.  In fact, there have been several attempts in the past 20 years to publish economic data in bite sized chunks targeting a more general audience but they tend to peter out mainly because it takes time and effort to update the data.  In fact I still recall one Cabinet Minister saying they “didn’t like to compare New Brunswick to other provinces”.  Like the Cheshire Cat says in Alice in Wonderland, if you don’t know where you are going pretty much any road will get you there (paraphrased).

I much prefer Herb Emery’s economic dashboard, Boostnb.com.   His team of students is actually updating the data with comparison and insight  – similar in style to OneNS.ca.   You have to give Nova Scotia kudos.  They keep updating all the indicators even as a significant number are ‘not progressing’.  One hopes government, business and community leaders are trying to figure out why and develop solutions.

What is the purpose of economic dashboards?  Ideally to ensure that a wide population understands the state of the province – economy, demography, public finances, etc. and therefore governments will have public support to tackle any challenges.  Hiding politically uncomfortable data and hoping no one stumbles on it is not a particularly robust approach to policy development.

Posted in Uncategorized | Comments Off on NB government’s economic dashboard: A good first step

Putting the ‘season’ in seasonal employment

I was chatting with a colleague recently about seasonal industries and the seasonal workforce in New Brunswick.  There are various data sources for this.  We can use the unadjusted Labour Force Survey data to compare the highest employment month to the lowest (around 20,000 or 6ish percent).  We can also use the reasons for leaving jobs data from the LFS – permanent layoff, temporary layoff, etc.  Neither of these are particularly satisfying because they don’t get at the root of seasonality within industry.  We can use the Census to help us understand who works part year but a lot of time this is by choice and not because of the seasonality of industry.  In fact, using this measure New Brunswick has about the same share of the workforce working ‘part year’ as the rest of Canada.

The Canada Employment Insurance Commission has it’s own definition of seasonal industries – in the context of EI – but doesn’t (at least recently) publish the data on a provincial level. You can read the full 545 page report here but don’t expect a lot of granular data at the provincial – let alone sub-provincial level

For me the issue is what do you want the information for?  Increasingly we want to know how many people in a community are unavailable for work because they are employed seasonally.  This is becoming a very important data point because we have many communities with ‘high’ unemployment but with employers that are struggling to find workers.

The problem is that both from an LFS perspective and an EI perspective, seasonal workers are supposed to be ready and willing to work.  People on EI have to show they are actively seeking work to keep getting their EI cheques.

What I have said all along is that we should end this fiction.  Every one of the 40,000 or so people in New Brunswick (I don’t know the real number, this number was in an EI Commission report from a few years ago) who are waiting until their job starts up again next ‘season’ – should be carved out of the unemployment data.  If government wants to change the EI program – in legislation and practice – it can do that but otherwise we need to end the fiction there are thousands of NBers unemployed and seeking work at any given time.  There are some certainly – but many business owners around New Brunswick will tell you they have never seen such a tight labour market – even as there are still many people nominally unemployed.

From the Census we have data on how many people who collected employment income also collected EI income in 2015 – as one proxy for the EI usage situation in New Brunswick.  I have published this data before on these pages.

Across New Brunswick, there were 424,000 people who indicated on the Census they earned employment income in 2015 and 101,000 that collected Employment Insurance payments or about 24 percent of the total.  Now that is not the ‘seasonal’ unemployment rate because many presumably were only unemployed as a result of other factors and, a few thousands received EI because of having a baby – not to confuse the issue further.

Compared to the national figure, EI usage is 92 percent higher in New Brunswick which is a first level indicator of the high seasonal unemployment.  If we had the national rate of EI usage, that would mean that 49,000 less people in New Brunswick would have received EI income in 2015.  This is pretty close to my estimate above of 40,000.

But using this measure, there were 114 communities around New Brunswick were 30 percent or more collected EI during the year (out of 240+). There were 62 where 40 percent or more collected EI income and there were a whopping 30 where 50 percent or more of everyone with employment income also reporting EI income.  Most of these were in northern New Brunswick but also in other natural resources-based areas.

The following table shows the highest 10 and the lowest 10 across the province.  What this means is that at some point during the year 65 percent of everyone living in Bas-Caraquet who was working also collected EI income.  So, if things were synchronized the community would have had an unemployment rate of 65 percent.

By contrast, only New Maryland had a working population where less than 10 percent collected EI income.

So what do we learn from this data? First, the ‘seasonal’ workforce is much larger than 6 percent – it is closer to 10 percent to 12 percent.  Second, it is somewhat concentrated in parts of New Brunswick making it harder to really change without seriously impacting specific communities in a very negative way.

So back to my original point.

If you don’t want to change the EI system, then ring fence it and work with employers around the province who need to find workers.  Don’t proceed with the fiction.  If there are over 500 people in Neguac who stop working at some point during the year or over 50 percent of all workers in the community and the local Subway restaurant can’t find sandwich artists – either a) change the EI program or b) help the local employer figure out another solution as sandwich artists represent a strategically important part of the workforce (this is meant for my son who recently started in this role in Fredericton).

I’d like a new unemployment statistic.  The number of people in a community who are a) unemployed, b) actively seeking employment and c) willing to take anything on offer until something more aligned with their skills and interests comes along.

I wonder what that unemployment rate would be?

Posted in Uncategorized | Comments Off on Putting the ‘season’ in seasonal employment

Exporting professional services: An important way to boost exports and economic growth

When most people think of exports, lobsters, French Fries and 2X4s come to mind.   But we can’t forget about services-based exports as they are becoming a much more important part of the export picture.  Services exports range from hotel accommodations for out-of-province travelers to New Brunswick to someone from Alberta filing an insurance claim with a call centre agent in Moncton to a law firm in Saint John generating revenue from a client in Ontario.

Professional services exports* alone generated an estimated $431 million worth of interprovincial and international export revenue for New Brunswick firms in 2015.  This included $110 million for IT services (computer systems design and related services), $136 million for architectural, engineering and related services, $36 million worth of accounting services, and $135 million for specialized design services.  New Brunswick law firms generated $28 million worth of business from outside the province.

On the flip side, we imported $1.2 billion worth of professional services so we actually had a huge trade deficit in this area.  Imports included $108 million worth of legal services, $256 million worth of IT services, $146 million worth of custom software development, $216 million worth of management, scientific and technical consulting services and $80 million worth of advertising, public relations and related services. BTW, I am annoyed at this last one.  We only generate $8 million worth of advertising and PR-related export revenue so we import 10 times as much as we export in this sector. Manitoba generates nearly $40 million and so does Nova Scotia.

How do we boost professional services export revenue?  One way is to tie-up with a national or international firm that already has established global clients.

Moncton-based ShiftCentral, a kind of market research firm, sold to a larger US firm called LAC Group and now I read they are planning to double their Moncton office. If they accomplish this it will mean several million dollars in new export revenue flowing in every year.

I know some people get nervous when NB firms sell out to national or international firms. Decision making leaves the province.  Sometimes senior leadership leaves (e.g. NBTel).  Sometimes they close their NB office altogether.

This is a risk but it is one worth accepting.  When local firms get bought out, it can lead to a significant boost in sales and export revenue for New Brunswick.  Even it if doesn’t, the investment made in the firm – at least in part- will be reinvested by the original owners in New Brunswick in other ways – hopefully some into new startup companies creating a positive feedback cycle: startup leading to national investment = new risk capital flowing around New Brunswick = new investment into other startups.

If you are interested in the professional services trade balance, here it is.  We actually have a trade surplus in accounting services (go get ’em bean counters)!  We also have a small surplus in R&D services (giddyup RPC) and a surplus in photographic services (who knew?).   The rest?  Big deficit.  The management and related consulting services figure is a bit disturbing.  I know we need to bring in expertise from time to time but $217 million per year?  Maybe I’m just jealous that MDB Insight is prowling around down here stealing my business (just kidding!).

Adjust for population size, New Brunswick ranks 8th among the 10 provinces for professional services exports per capita (I accidentally highlighted PEI here).  We generate 14% less than Nova Scotia and Manitoba – sounds like a challenge.  I’ve been told by lawyers in New Brunswick that we can’t generate more export revenue.  Tell that to Nova Scotia lawyers – $60 million in export revenue in 2015 and a positive trade balance in this area.  I’ve been told by our advertising and PR industry that we can’t generate more export revenue because we are too small. Tell that to Nova Scotia marketers – $39 million worth of export revenue in 2015.  I’ve been told by New Brunswick consulting firms that we can’t generate more export revenue because it is hard to compete with the national and international firms.  Tell that to Nova Scotia – $110 million in management and related consulting services-related exports in 2015.

*Includes legal, accounting, IT, consulting, R&D, marketing and related services.  Does not include business services, information services, etc.

Posted in Uncategorized | Comments Off on Exporting professional services: An important way to boost exports and economic growth