From commercial fishing (shown here in Comox) to mining to tech, B.C.'s economy is very diverse
It was a good year for revenues among this year’s Top 100 companies, but tight margins could throttle our ambitions abroad
Super, Natural British Columbia: Destination BC’s tourism tag line is equally apt for the province’s economy, linked as it has been for two centuries to the wealth of its land and water. Oil and natural gas are the latest contenders for dominance alongside the fishing, forestry, mining and hydroelectric projects that have been the economic backbone of the province. Of course, oil is slumping—and with it Alberta’s economy, not to mention the Canadian dollar—and dreams of liquefied natural gas exports remain just that: dreams. And yet BMO Financial Group forecast this spring that British Columbia will lead Canada in economic growth for 2015—the first time it’s done so in 10 years.
B.C.'s biggest companies
1. Telus Corp.
2. Teck Resources Ltd.
3. Jim Pattison Group
Who else made THE TOP 100?
See our ranking >>
Why, then, is B.C. doing well? The answer lies in the province’s diversity, as a glance at this year’s Top 100 companies shows. Selling everything from chickens to chicken wire, B.C.’s biggest companies peddle a wide enough variety of products that when one sector is down, another two can pick up the slack. Total revenues for the Top 100 companies grew 6.5 per cent last year—compared to 5.4 per cent in 2013—reaching an aggregate $159.7 billion. Also up is the minimum revenues threshold to be considered a Top 100 company, which has climbed steadily since 2010 and now sits at $271.1 million.
Perhaps surprisingly, this growth was driven in part by miners. While many commodity prices took a beating—with giants Teck Resources and Silver Wheaton among the biggest losers in terms of revenues—newcomer Turquoise Hill Resources debuted on our list with $1.8 billion in revenues as production came on stream, showing that the sector still has legs. Similarly, a buoyant real estate sector saw Concert Properties return to the list as its revenues doubled, while insurer Travelers Financial Group saw 43.7 per cent growth. Among the list’s be-hemoths, losses at resource-dependent companies such as Teck were more than made up for by ongoing growth at top-ranked Telus, with $12 billion in revenues, the Jim Pattison Group, at $8.4 billion, and BC Hydro, at $5.4 billion.
Consolidation—driven by competition both here and abroad—has squeezed several mid-tier companies off the list (including Eastern Platinum and publicly traded tech startup PNI Digital Media), however. The departure of mid-size players has left a corporate landscape increasingly dominated by either the very big enterprise or the glitzy young startup. And while tech darlings such as Hootsuite continue to attract major rounds of venture capital financing and invest in facilities here, it’s unclear when or if they’ll ever crack the Top 100. (Privately held, Hootsuite holds its financials tightly, though a much-speculated IPO would paint a fuller picture.)
But does it even matter if the province isn’t growing a new crop of companies to follow in the footsteps of its largest firms? Ken Peacock, chief economist with the Business Council of B.C., thinks it does. “It’s one thing having ICBC and WorkSafe doing well and being profitable, but you want a vibrant, robust export sector over the long term to grow wealth and prosperity in B.C.,” he says. “When a company starts exporting, it can take advantage of economies of scale and have access to much larger markets. It tends to be more productive, generally, because of the discipline of having to compete in the international marketplace.”
That’s not only good for the company, Peacock says—it’s good for workers, because better revenues often translate into better wages.
Still, growing by going global isn’t a surefire path to success, as many mining companies will tell you. “We’re essentially six or seven years past the Great Recession, and we’re still being hampered by a relatively slow-growth market globally,” explains Bryan Yu, senior economist with Central 1 Credit Union in Vancouver. If demand’s not there, says Yu, it puts cost pressure on the rest of the business. And in 2014, there were many cost pressures—including a reinstated provincial sales tax—for businesses to account for.
Then there are the historically low interest rates, which are good for just about everybody—except financial institutions. “Areas such as financial are still being squeezed by tight margins in terms of what they’re getting and the rates they’re paying out,” says Yu. “It’s essentially a gap that narrows, and that’s something they’ve been facing for a few years now.” While consolidation among credit unions has created internal efficiencies and facilitated new investments, pinched margins present a universal challenge. They make it harder for companies to reinvest in themselves and their workers. On average, Canadian companies invested $13,200 per worker in their operations last year, but B.C. companies spent just $10,400—the least of any province in Western Canada.
Rising revenues are good, but without reinvestment, it will be harder for companies to gain a greater share of global markets—in good times, as well as bad. While the biggest companies on this year’s Top 100 list might rule the domestic pond, a lack of investment threatens to leave them gasping for air when they reach the roiling global waters.