As B.C. starts to reopen in the wake of the coronavirus pandemic, how can businesses rebound from this unprecedented event?
by Steve Burgess
The 2020 edition of Invest in BC was researched and prepared before the COVID-19 pandemic prompted a shutdown of the provincial economy. We asked several experts to weigh in on the road ahead for businesses and communities.
Call it a black swan, a meteor strike or a sucker punch. However you describe it, the COVID-19 crisis wasn’t an event that business analysts predicted for 2020. Although B.C. has managed the public health fallout from the global pandemic better than many other jurisdictions, there are new economic uncertainties and realities in play.
Fortunately, the federal and provincial governments have stepped up with tens of billions of dollars in wage subsidies, business loans and other support. And as B.C. takes cautious steps to reopen the economy, not every industry has been left reeling. A few specialty manufacturers have even benefited (Plexiglas makers, for instance). Supermarkets, most food production and construction have continued more or less as before. But the damage has been considerable.
Just how bad a hit has the province taken? Ken Peacock, chief economist and vice-president of the Business Council of British Columbia, offers some startling perspective. “In the worst month of the 2008-09 financial crisis, B.C. lost about 10,000 jobs,” Peacock says. “Over a nine-month period during that recession, we lost about 70,000 jobs. That was a deep recession.”
But this March alone, 132,000 jobs vanished from B.C., Peacock notes. Job losses doubled in April, reaching 264,000. “As of May, we are at about 11-percent unemployment,” Peacock explains. “In the private sector, almost one in four jobs have been lost.” The BCBC’s economic forecasts have become more pessimistic as events unfolded. “We are now honing in on a number of minus-8 percent GDP for 2020,” Peacock says.
The COVID-19 crisis is a unique double blow, he stresses. The usual victims of a downturn—big-ticket items like cars and furniture, business investment, export activities—have been hurt. But even in a recession, the economy can usually count on the service sector. “This time around, that hasn’t been the case,” Peacock says. “Consumer spending has been eviscerated. That’s why this recession is deep and nasty.”
For the most part, COVID-19 is a private sector crisis, Peacock says: “Of those job losses, only about 18,000 were in the public sector.” Meanwhile, the young have been hit the hardest: “We now have 25-percent unemployment in the 15-24 age group.”
A matter of time
A rebound will happen. But how big a bounce will it be, and how long will recovery take? After the 2008-09 recession, Peacock recalls, it took at least three-and-a-half years to get back to the pre-recession level. “An optimistic view might be that we could recover half the lost jobs by year’s end,” he says. “This will be a multiyear recovery process.”
Some jobs will be permanently in jeopardy, predicts Andrey Pavlov, a professor of finance at SFU Beedie School of Business. “There will be pent-up demand, and people will want to return to their old routines,” he says. “But reopening restaurants doesn’t mean people will return to them.”
Pavlov also believes the crisis has created more problems for businesses already suffering from online competition. “Are people who have been forced to do more business online going to switch back to retail?” he asks. “Are people going to re-evaluate how often they need to get a haircut, for example?”
The recovery will inevitably feature regional disparity. “Just because of the size of the Metro Vancouver area and even the Okanagan, they will fare better,” Peacock reckons. “Some regional communities I would be very concerned about.”
Because we’re now in a global recession, commodity prices are being impacted, Peacock observes. For regional and resource-dependent economies, he says, the top uncertainty is business investment. Many communities throughout the province rely on the forest products industry, which was already struggling before the current downturn. “Are businesses going to continue to put money into their plants and operations, update them and refurbish them, or is there going to be more of a wait-and-see approach?” Peacock asks. “That will be the big question.”
Smaller centres are also more dependent on tourism. “Tourism was hit earliest and will be the longest coming out,” says Nancy Small, co-chair of the Metro Vancouver Tourism and Hospitality Industry Response and Recovery Task Force. “We will lose a great portion of what is typically an incredible summer season.”
For his part, Peacock hopes to see more domestic tourism activity because British Columbians can’t easily travel overseas. Small agrees, but she points out that domestic travellers are unlikely to spend nearly as much on a trip to Tofino as they would have on a European vacation. “As well, there will be fewer people with disposable income.”
Peacock and Small agree that smaller communities will be hardest hit by the drop in tourism. “Even for Interior cities like Kelowna, they’re going to feel it,” Peacock says. Government has provided an extraordinary amount of fiscal and monetary stimulus, which will help, he adds. “But it’s not going to offset the downturn. If we’re going to see these jobs come back, it’s going to be because of private businesses rehiring.”
Pavlov would like to see loosening of regulations surrounding licensing and certification. “Businesses will need to adjust and find ways to survive,” he says. “New technologies, new ways of delivering goods and services. Governments can help businesses be flexible by reducing the regulatory burden.”
Realistically, the jobs won’t all come back, Peacock warns. “Government will have to create the conditions for businesses to grow and prosper, and we’re going to be looking for new jobs as well as getting old jobs back if we want to have any hope of any sort of a meaningful recovery.”
The British Columbia Economic Development Association is a leader in Canada when it comes to economic recovery. Since 2012, BCEDA has been providing assistance to communities impacted by disaster and encouraging others to plan for future ones. Early in the COVID-19 pandemic, BCEDA launched its Economic Disaster Recovery Program, and it continues support communities throughout British Columbia. “Local leaders, economic developers and other community organizations will lead the local-based economic recovery, and we are proud to help them establish programs, modify regulations and launch consultation processes to support every business,” says Dale Wheeldon, president and CEO of BCEDA. “Local businesses will need the support of all levels of government as we take the steps necessary to adapt to a new way of doing business.”