Dawn Desjardins, Deputy Chief Economist at RBC, Discusses the “Small Business, Big Pivot” Report

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[00:00] SPEAKER_00: It's Toronto's podcast on the Canada's podcast network.
[00:04] SPEAKER_01: Hi everyone, welcome to Canada's podcast.
[00:07] SPEAKER_01: Canada's number one business podcast for entrepreneurs.
[00:11] SPEAKER_01: I'm Philip Bliss, host of the Ontario edition,
[00:14] SPEAKER_01: coming to you today from Toronto.
[00:16] SPEAKER_01: Today we're going to interview Don Desjardins,
[00:19] SPEAKER_01: the vice president and deputy chief economist at RBC Royal Bank.
[00:24] SPEAKER_01: A recent RBC thought leadership report,
[00:27] SPEAKER_01: small business, big pivot,
[00:29] SPEAKER_01: really resonated with the entrepreneurial team
[00:32] SPEAKER_01: at Canada's podcast.
[00:34] SPEAKER_01: And Don agreed to come on the show
[00:36] SPEAKER_01: and give our list of viewers some insights on its findings.
[00:40] SPEAKER_01: Don, welcome to Canada's podcast.
[00:44] SPEAKER_01: So Don, let me dive in and ask you the first question,
[00:47] SPEAKER_01: because I always like people to stay with us
[00:50] SPEAKER_01: while we get the question.
[00:52] SPEAKER_01: So I think we all know that small business has been
[00:55] SPEAKER_01: in the current pandemic, but maybe let's start by,
[01:01] SPEAKER_01: you know, giving us numbers of snapshot of the impact
[01:04] SPEAKER_01: to small business and the overall economy in Canada.
[01:08] SPEAKER_00: Well Phil, small businesses, as we know,
[01:11] SPEAKER_00: are very, very important.
[01:12] SPEAKER_00: Counting 42% of our economic output,
[01:16] SPEAKER_00: they created 48% of new jobs in recent decades.
[01:20] SPEAKER_00: And early in the crisis, firms that had 100 employees or less.
[01:24] SPEAKER_00: So that's to give you a ballpark of what kind of,
[01:27] SPEAKER_00: what size companies are talking about here.
[01:29] SPEAKER_00: They accounted for about 60% of the jobs that were lost.
[01:34] SPEAKER_00: And that's more than double the share of the job losses
[01:36] SPEAKER_00: that they can't afford during the great recession.
[01:38] SPEAKER_00: So that's just to give you a little bit of contact
[01:40] SPEAKER_00: of the power.
[01:41] SPEAKER_01: That's scary.
[01:42] SPEAKER_01: Yeah.
[01:42] SPEAKER_00: It is.
[01:43] SPEAKER_00: And recent surveys indicate that small businesses now say,
[01:48] SPEAKER_00: so this was as of mid June, so about a month ago,
[01:51] SPEAKER_00: only about a third of them said they were back
[01:53] SPEAKER_00: to the usual number of employees.
[01:55] SPEAKER_00: And that's even though when we read the headline numbers
[01:58] SPEAKER_00: for the economy, we have lots of jobs being created.
[02:01] SPEAKER_00: But for small businesses, it's still quite a struggle.
[02:05] SPEAKER_00: And we know that overall, the scale, the size of this
[02:09] SPEAKER_00: economic downturn is unprecedented.
[02:12] SPEAKER_00: We've only closed for half a month and a month of March.
[02:15] SPEAKER_00: And when you think about it, it's quite amazing
[02:17] SPEAKER_00: that that was able to drive our economy into negative territory
[02:21] SPEAKER_00: by over 8% annualized place in the first quarter.
[02:24] SPEAKER_00: So that was just two weeks.
[02:26] SPEAKER_00: So when we look at April, that was by far a much worse month
[02:31] SPEAKER_00: for our economy.
[02:33] SPEAKER_00: And that showed economic growth down 12% in that month,
[02:36] SPEAKER_00: compared to March.
[02:37] SPEAKER_00: So these are numbers that as an economist,
[02:39] SPEAKER_00: you're not looking to ever forecast that
[02:43] SPEAKER_00: or think that that's going to be it.
[02:44] SPEAKER_00: So overall, I would say what we're seeing is an economy
[02:48] SPEAKER_00: that is under significant downward pressure
[02:51] SPEAKER_00: across the board, in particular for small businesses,
[02:54] SPEAKER_00: but certainly across the board.
[02:55] SPEAKER_00: In fact, we wouldn't be surprised if,
[02:58] SPEAKER_00: for the second quarter of 2020, the economy contracted
[03:01] SPEAKER_00: at greater than 35% annualized place.
[03:05] SPEAKER_00: But the data for May and June, a little bit better,
[03:08] SPEAKER_00: you know, we've had this gradual reopening.
[03:10] SPEAKER_00: Overall, we saw three million jobs lost
[03:12] SPEAKER_00: in the first couple of months.
[03:14] SPEAKER_00: And about 1.2 million jobs recreated in May and June.
[03:18] SPEAKER_00: But doing the math, you know that that's 1.8 million
[03:22] SPEAKER_00: fewer Canadians working than in February.
[03:26] SPEAKER_00: So it is a pretty large number economic downturn.
[03:31] SPEAKER_00: And we think on that when we exit 2020,
[03:34] SPEAKER_00: we think we'll have some growth in the second half of this year,
[03:36] SPEAKER_00: but we'll still be down about 5% compared to where we were
[03:40] SPEAKER_00: at the end of 2019.
[03:42] SPEAKER_00: And we'll still have an unemployment rate
[03:43] SPEAKER_00: at about 8.5%.
[03:45] SPEAKER_00: So that's three percentage points above where we entered this.
[03:49] SPEAKER_00: So, you know, pretty tough environment for businesses.
[03:52] SPEAKER_01: What happens in the future?
[03:54] SPEAKER_01: If small business, which you say quite clearly
[03:58] SPEAKER_01: is taking such a battering, what role do they have in our recovery?
[04:03] SPEAKER_01: I mean, I wouldn't stay on the positive side.
[04:04] SPEAKER_00: Yeah, yeah, yeah, because we know
[04:07] SPEAKER_00: small businesses are so key to our economy, right?
[04:10] SPEAKER_00: They are the job creators.
[04:12] SPEAKER_00: They're the ones that are paying the tax revenues in our cities
[04:16] SPEAKER_00: or the ones that are supporting our community.
[04:19] SPEAKER_00: So definitely when we think about what does it mean
[04:22] SPEAKER_00: for the future, it is getting these small businesses
[04:25] SPEAKER_00: gradually back on a growth trajectory.
[04:29] SPEAKER_00: And we know some are wanting to take longer than others,
[04:32] SPEAKER_00: but we do think that as the opening,
[04:34] SPEAKER_00: real opening, I guess I should say, for the economy continues,
[04:37] SPEAKER_00: it will start to see businesses come forward
[04:41] SPEAKER_00: and start to see increased demand for the business services.
[04:45] SPEAKER_00: And in turn, allow them to hire some of their employees back.
[04:50] SPEAKER_01: It's all very well, that's a very positive statement.
[04:54] SPEAKER_01: But, you know, speaking to friends of small businesses,
[04:58] SPEAKER_01: how do they do that?
[04:59] SPEAKER_01: You know, you know, it's hard.
[05:02] SPEAKER_01: You know, what are the challenges they face?
[05:06] SPEAKER_01: I think we need a little bit more explanation.
[05:10] SPEAKER_01: I know in the report, there was a good bit on that.
[05:12] SPEAKER_01: And I think it's going to be really useful to hear it.
[05:16] SPEAKER_00: I mean, we know that businesses, small, medium,
[05:20] SPEAKER_00: and big, have faced significant challenges during this downturn.
[05:24] SPEAKER_00: In particular, when we think about small businesses,
[05:26] SPEAKER_00: some of them have high fixed costs.
[05:29] SPEAKER_00: Some of them have very, very razor-thin margins
[05:31] SPEAKER_00: and so very low cash flow.
[05:34] SPEAKER_00: So these have been challenging, they're very survival.
[05:36] SPEAKER_00: And as we go forward, the other factor that I think
[05:40] SPEAKER_00: has happened is we've seen the way the economy is operating
[05:44] SPEAKER_00: change, certainly more mobile and more digital.
[05:50] SPEAKER_00: And so we looked at surveys in our report.
[05:53] SPEAKER_00: This was 2017, so probably some ground has been made.
[05:56] SPEAKER_00: But having said that, in 2017, statistics,
[05:59] SPEAKER_00: Kansas said that nearly half of the firms
[06:02] SPEAKER_00: that had 500 employees or less.
[06:04] SPEAKER_00: So still, in the medium size, really,
[06:07] SPEAKER_00: they didn't have a digital, their own business website.
[06:10] SPEAKER_00: And if they did, about 10% of them could actually
[06:14] SPEAKER_00: receive, try and fact, receive payments.
[06:17] SPEAKER_00: So we think about today and what's happening in terms
[06:19] SPEAKER_00: of the economy and what this has caused.
[06:22] SPEAKER_00: You know, a lot of this visible distancing,
[06:25] SPEAKER_00: the fact that we had to close down businesses.
[06:28] SPEAKER_00: You know, that said that companies that were digitally enabled,
[06:31] SPEAKER_00: at least were able to get some cash flow through
[06:35] SPEAKER_00: during this very difficult time.
[06:38] SPEAKER_00: So, you know, that is definitely a big challenge
[06:41] SPEAKER_00: because it's almost like the game has changed.
[06:44] SPEAKER_00: And it's changed far more quickly than most of us
[06:47] SPEAKER_00: would have expected.
[06:48] SPEAKER_00: Now, governments, you know, are really trying to help.
[06:51] SPEAKER_00: They're trying to shore up businesses,
[06:53] SPEAKER_00: provide them with cash flow, talking about ensuring
[06:56] SPEAKER_00: that we have high-speed internet across the entire country.
[07:00] SPEAKER_00: So we're trying to ensure that the setup is there for businesses.
[07:04] SPEAKER_00: But again, we have to also support businesses
[07:07] SPEAKER_00: as they make that journey because it is a totally different world
[07:11] SPEAKER_00: as we go post-COVID.
[07:14] SPEAKER_01: So, you know, I get what you're saying,
[07:17] SPEAKER_01: but being a small-to-medium business entrepreneur
[07:21] SPEAKER_01: and that talks to hundreds, thousands of small business
[07:28] SPEAKER_01: entrepreneurs across the country, we've got debt loads.
[07:32] SPEAKER_01: You know, and we've got loads of debt, you know,
[07:34] SPEAKER_01: the government gave us some great grants.
[07:39] SPEAKER_01: But, you know, this is going to be paid back.
[07:43] SPEAKER_01: Consumers' behavior is changing.
[07:44] SPEAKER_01: You know, I live in downtown Amelden.
[07:47] SPEAKER_01: And yeah, there's patios, but there's not as many people
[07:49] SPEAKER_01: as they used to be.
[07:50] SPEAKER_01: I think they've got that 90-day kind of lockdown,
[07:53] SPEAKER_01: really, it's kind of different.
[07:56] SPEAKER_01: You know, supply chains, all of these things, you know,
[08:00] SPEAKER_01: if you've got any insights into that.
[08:02] SPEAKER_00: Yeah, I mean, I think you're, you know, the data it shows.
[08:05] SPEAKER_00: I mean, you know the real-life situation,
[08:08] SPEAKER_00: but even from the data point of view,
[08:11] SPEAKER_00: we see industries have debt loads that are very high,
[08:14] SPEAKER_00: some industries, some companies.
[08:16] SPEAKER_00: And so, as you say, we have seen some government programs
[08:19] SPEAKER_00: really hoping and helping.
[08:23] SPEAKER_00: Some of these companies get through this tough patch
[08:25] SPEAKER_00: and seem deferral, certain taxes, for example,
[08:28] SPEAKER_00: the pearls of some fee.
[08:29] SPEAKER_00: So, that's all really trying to address that idea
[08:33] SPEAKER_00: of elevated levels of debt,
[08:35] SPEAKER_00: but really making it to the other side of this crisis.
[08:38] SPEAKER_00: And when we think about consumer behavior,
[08:41] SPEAKER_00: I think you're absolutely right.
[08:43] SPEAKER_00: You know, things have changed remarkably.
[08:45] SPEAKER_00: You know, when you look at things like e-commerce
[08:47] SPEAKER_00: and some other day, and wow, that number is picking up,
[08:51] SPEAKER_00: but considerably, as one would expect,
[08:53] SPEAKER_00: that was the only way you really could get anything.
[08:56] SPEAKER_00: And you even think about how businesses are trying to adapt.
[09:00] SPEAKER_00: You think about dying in restaurants.
[09:02] SPEAKER_00: You know, now you can order from them.
[09:05] SPEAKER_00: And at the same time, you know,
[09:07] SPEAKER_00: buy wine and spirits and beer from them.
[09:10] SPEAKER_00: So, we are seeing businesses adapt.
[09:13] SPEAKER_00: And that's all very good,
[09:14] SPEAKER_00: but it's going to continue, I think, along that road.
[09:18] SPEAKER_00: We're going to have, you know, more digital,
[09:21] SPEAKER_00: whether it's delivery,
[09:22] SPEAKER_00: we're going to have probably more domestic procurement.
[09:26] SPEAKER_00: We're going to probably see a little less market concentration.
[09:28] SPEAKER_00: And probably, I would think, and just to your point,
[09:32] SPEAKER_00: you know, caution on the behalf of consumers.
[09:36] SPEAKER_00: I mean, people are nervous.
[09:38] SPEAKER_00: They don't want another outbreak.
[09:40] SPEAKER_00: They're concerned about how, you know,
[09:43] SPEAKER_00: they're going to be shopping.
[09:45] SPEAKER_00: So, I think all of that says to us that you're right.
[09:48] SPEAKER_00: It has been a significant shift.
[09:50] SPEAKER_00: And businesses are going to really have to figure out
[09:55] SPEAKER_00: how can they get their product to these people.
[09:59] SPEAKER_00: So, you know, when we think about,
[10:01] SPEAKER_00: what does that mean in terms of supply chains?
[10:04] SPEAKER_00: Well, I mean, I think many global
[10:05] SPEAKER_00: supply chains will remain intact,
[10:07] SPEAKER_00: but, you know, this really did bring to light
[10:09] SPEAKER_00: the vulnerability of these supply chains.
[10:12] SPEAKER_00: So, wouldn't be terribly surprising
[10:14] SPEAKER_00: if we saw a little bit of on-shoring.
[10:16] SPEAKER_00: And that does create opportunities for some companies,
[10:20] SPEAKER_00: locally, to sort of step into the void
[10:22] SPEAKER_00: where we've only been going outside of Canada.
[10:25] SPEAKER_01: So, without being too pessimistic,
[10:29] SPEAKER_01: I still want to dive deeper into the state
[10:31] SPEAKER_01: of small business in general and Canada.
[10:33] SPEAKER_01: I think it's good for everyone to know what the numbers are.
[10:38] SPEAKER_01: And I know the report has some of those numbers.
[10:41] SPEAKER_01: So, you know, maybe you can let us know
[10:43] SPEAKER_01: what some of those are.
[10:45] SPEAKER_00: Sure.
[10:46] SPEAKER_00: I mean, you know, we're thinking about small business
[10:47] SPEAKER_00: and you think about just how varied
[10:49] SPEAKER_00: and how many different industries
[10:52] SPEAKER_00: these small businesses touch.
[10:54] SPEAKER_00: And when we look at the data,
[10:56] SPEAKER_00: what it showed us that was in 2019.
[10:58] SPEAKER_00: So, just last year, which seems a decade ago,
[11:02] SPEAKER_00: almost 43% of employment in the private sector
[11:06] SPEAKER_00: came from businesses with employees less than 100.
[11:09] SPEAKER_00: So, you know, definitely it tells us that this is,
[11:13] SPEAKER_00: these are the companies that are driving,
[11:17] SPEAKER_00: job growth, they're driving our economy.
[11:19] SPEAKER_00: As I said at the beginning, you know,
[11:21] SPEAKER_00: we're looking at companies that generate 42%
[11:25] SPEAKER_00: of our economic output.
[11:26] SPEAKER_00: So, definitely, you know, very meaningful
[11:29] SPEAKER_00: and very important for Canada's economy as we move forward.
[11:33] SPEAKER_01: I think most entrepreneurs in Canada
[11:36] SPEAKER_01: don't really have a picture of how important they are.
[11:41] SPEAKER_01: So, let's give them credit.
[11:42] SPEAKER_01: How does entrepreneurship encounter rank against
[11:45] SPEAKER_01: some of the other countries that you've looked at?
[11:48] SPEAKER_00: Well, I think what International Studies will say is,
[11:51] SPEAKER_00: you know, we are a good country for small businesses.
[11:55] SPEAKER_00: In a World Bank survey, for example,
[11:58] SPEAKER_00: they said that Canada ranked number two
[12:01] SPEAKER_00: as one of the easiest places to set up a business.
[12:05] SPEAKER_00: So, that's good.
[12:06] SPEAKER_00: We also ranked very high in terms of entrepreneurial traits
[12:10] SPEAKER_00: and they're asking, you know, people about what their aspirations are
[12:14] SPEAKER_00: and how they feel about risk taking
[12:15] SPEAKER_00: or, you know, how confident they are
[12:17] SPEAKER_00: that they can run their business and be successful.
[12:19] SPEAKER_00: And again, we do have very high ratings there.
[12:23] SPEAKER_00: And of course, when we look at our tax laws,
[12:26] SPEAKER_00: you know, for small businesses,
[12:28] SPEAKER_00: it is comparing quite favorably to other countries across the globe.
[12:33] SPEAKER_00: So, I would say from the entrepreneurial standpoint,
[12:37] SPEAKER_00: Canada does present a pretty good market for businesses to get going.
[12:42] SPEAKER_01: Oh, some good news.
[12:44] SPEAKER_01: That's great.
[12:44] SPEAKER_01: That sounds really good.
[12:46] SPEAKER_01: So, I guess the next thing is,
[12:48] SPEAKER_01: what's the support like in Canada for those entrepreneurs?
[12:52] SPEAKER_00: Well, that's really where we get the rub.
[12:54] SPEAKER_00: I guess I'd say, you know, when you look at the data,
[12:57] SPEAKER_00: what does it show it for?
[12:59] SPEAKER_00: It shows that Canada has many more small businesses
[13:02] SPEAKER_00: than in the United States, for example.
[13:05] SPEAKER_00: So, it's just that we're great at starting companies.
[13:09] SPEAKER_00: But growing them, that is more challenging.
[13:11] SPEAKER_00: In fact, when statistics Canada looks at companies
[13:15] SPEAKER_00: and they're trying to figure out, you know,
[13:17] SPEAKER_00: what's our economy made of, only about 10%
[13:22] SPEAKER_00: of these companies are considered high-growth companies.
[13:24] SPEAKER_00: So, you know, these are the areas we need to work on.
[13:27] SPEAKER_00: And then we think about, okay, so how, you know,
[13:29] SPEAKER_00: what's impeding that?
[13:31] SPEAKER_00: Well, one would be, of course,
[13:32] SPEAKER_00: inter-bergill trade barriers,
[13:34] SPEAKER_00: been born on the side of many company for a very long time.
[13:39] SPEAKER_00: And the other thing is what we notice
[13:41] SPEAKER_00: is there's been a shortage of capital
[13:44] SPEAKER_00: to get these businesses growing.
[13:47] SPEAKER_00: Maybe not so much going, but growing.
[13:49] SPEAKER_00: So, when we look at adventure capital, deal flow,
[13:52] SPEAKER_00: Canada is running about 2% of what that deal flow is
[13:54] SPEAKER_00: in the United States.
[13:55] SPEAKER_00: So, you know, we get a 10% we're out of two on this one.
[13:59] SPEAKER_00: So, definitely, I think, you know,
[14:02] SPEAKER_00: we have some impediments to grow.
[14:04] SPEAKER_00: So, it is getting through these impediments,
[14:07] SPEAKER_00: getting these kinds of capital, as well as the regulatory,
[14:11] SPEAKER_00: the red tape, getting that dealt with,
[14:13] SPEAKER_00: that will help our companies where they grow.
[14:17] SPEAKER_01: So, we're here.
[14:18] SPEAKER_01: We're, we're foremancent to the pandemic.
[14:21] SPEAKER_01: It'd be great considering where we're at
[14:23] SPEAKER_01: and maybe where we're going to.
[14:25] SPEAKER_01: Do you have any data that can guide us?
[14:29] SPEAKER_01: A lot of people really interested in that stuff.
[14:32] SPEAKER_01: So, you know, some data, data always helps.
[14:35] SPEAKER_00: Data is help, yes.
[14:37] SPEAKER_00: And so, what we did was we said, okay, you know,
[14:39] SPEAKER_00: just we're trying to think about our economy,
[14:42] SPEAKER_00: the deep hole we were in, you know,
[14:43] SPEAKER_00: what's going to look like on the other side?
[14:45] SPEAKER_00: So, we tried to look at companies
[14:48] SPEAKER_00: who had revenues between $30,000 and $5 million per year.
[14:52] SPEAKER_00: So, we thought, okay, that's going to be sort of
[14:54] SPEAKER_00: our universe of small businesses.
[14:57] SPEAKER_00: And then we said, okay, so that's our universe.
[14:59] SPEAKER_00: Let's dig into the data and see the role of fixed costs
[15:02] SPEAKER_00: in their operation, how they are set up
[15:05] SPEAKER_00: from a liquidity point of view.
[15:07] SPEAKER_00: Because we knew that would be very important.
[15:09] SPEAKER_00: And then of course, layering on that,
[15:11] SPEAKER_00: what types of businesses or what industries
[15:14] SPEAKER_00: will this physical distancing,
[15:16] SPEAKER_00: which is likely to persist even though we're going through
[15:19] SPEAKER_00: these phases of reopening.
[15:20] SPEAKER_00: And what's that, you know, implications for them?
[15:24] SPEAKER_00: So, I guess I'll start with the, you know,
[15:26] SPEAKER_00: slower growth strippers.
[15:27] SPEAKER_00: We found five industries that are going to continue
[15:30] SPEAKER_00: to be pretty challenged, we would say,
[15:32] SPEAKER_00: as we go throughout 2020.
[15:35] SPEAKER_00: Accommodation of the services, arts and entertainment,
[15:38] SPEAKER_00: non-essential retail, mining oil and gas.
[15:41] SPEAKER_00: And of course, there, that's an added ripple for them
[15:44] SPEAKER_00: because this pandemic has reduced commodity prices
[15:47] SPEAKER_00: so significantly in the industry.
[15:50] SPEAKER_00: Oil prices.
[15:51] SPEAKER_00: And then commercial real estate.
[15:53] SPEAKER_00: So, you know, we looked at those three factors.
[15:56] SPEAKER_00: So these are the five industries where we say,
[15:59] SPEAKER_00: they have higher fixed costs in general.
[16:01] SPEAKER_00: And they tend to have higher debt loans.
[16:04] SPEAKER_00: And so they, and they also of course require
[16:08] SPEAKER_00: physical interaction.
[16:10] SPEAKER_00: So that's going to really keep them being very challenged
[16:14] SPEAKER_00: even as to go through this reentry phase.
[16:17] SPEAKER_00: Now, when we look at companies in the manufacturing,
[16:20] SPEAKER_00: professional services, you know,
[16:22] SPEAKER_00: they tend to be in a better position
[16:25] SPEAKER_00: to manage this period of weakness.
[16:28] SPEAKER_00: They tend to have lower fixed costs
[16:29] SPEAKER_00: but they have higher variable costs.
[16:31] SPEAKER_00: So they're able to change their structure a little bit
[16:33] SPEAKER_00: and they tend to have more liquidity.
[16:36] SPEAKER_00: So it gave them a leg up in terms of being able to
[16:40] SPEAKER_00: get to the other side, I would say, the pandemic.
[16:44] SPEAKER_01: Well, that's great, but it still kept it depressing
[16:46] SPEAKER_01: what you were saying there.
[16:49] SPEAKER_01: But, you know, let's not stay with now.
[16:51] SPEAKER_01: Let's think of the futures a bit.
[16:54] SPEAKER_01: We know there's going to be a new normal.
[16:56] SPEAKER_01: We're living in it, okay.
[16:58] SPEAKER_01: Can you give us some thoughts on the future?
[17:00] SPEAKER_01: So our listeners' viewers can prepare
[17:03] SPEAKER_01: and maybe refocus a bit.
[17:06] SPEAKER_00: Yeah, as I said earlier,
[17:08] SPEAKER_00: you know, the economy fell quite significantly
[17:12] SPEAKER_00: in that period between March and April.
[17:16] SPEAKER_00: It's gradually creeping higher as we go through May 2.
[17:19] SPEAKER_00: We'll really start to show some greater strength
[17:24] SPEAKER_00: as we go through the second half of this year.
[17:26] SPEAKER_00: And of course, this assumes that we don't have
[17:28] SPEAKER_00: any broad-based outbreak again.
[17:31] SPEAKER_00: You know, law proppings, you know,
[17:34] SPEAKER_00: we think that can be managed for the economy
[17:36] SPEAKER_00: but if you start to see what we've just lived through,
[17:38] SPEAKER_00: you know, of course, all bets are off in terms of that growth.
[17:42] SPEAKER_00: But when we think about where that leads us again,
[17:45] SPEAKER_00: probably with a bit of a deficit compared to where we were
[17:50] SPEAKER_00: when we entered 2020.
[17:52] SPEAKER_00: Now, when we think about those hard hit industries
[17:54] SPEAKER_00: that I prefer to, we did some analysis to try and figure out,
[17:59] SPEAKER_00: okay, what does that look like for them?
[18:00] SPEAKER_00: What should they be expecting?
[18:02] SPEAKER_00: You know, we think of things about arts and entertainment.
[18:05] SPEAKER_00: You know, if we're not going to have thousands of people
[18:08] SPEAKER_00: able to congregate any time soon,
[18:11] SPEAKER_00: you know, that's going to leave them in a pretty tough spot.
[18:13] SPEAKER_00: So we have them, you know, the growth not recovering,
[18:17] SPEAKER_00: only half of the growth recovered compared to the decline
[18:20] SPEAKER_00: they've seen by the end of this year.
[18:22] SPEAKER_00: Looting and compensation services, you know, again,
[18:25] SPEAKER_00: probably about a third below where they would have been
[18:28] SPEAKER_00: had it not for a bit this pandemic.
[18:31] SPEAKER_00: Are there sectors, of course, professional services,
[18:34] SPEAKER_00: healthcare, those industries will get back, we think,
[18:38] SPEAKER_00: to, you know, within a pretty narrow margin of where they were.
[18:43] SPEAKER_00: So, you know, again, we think that we're going to see
[18:46] SPEAKER_00: pent up demands, you know, being released into the economy.
[18:50] SPEAKER_00: We have a consumer tracker that we look at,
[18:52] SPEAKER_00: and we're just trying to get a gauge
[18:53] SPEAKER_00: on how our consumers coping through this.
[18:56] SPEAKER_00: And what it showed us for the month,
[18:57] SPEAKER_00: or by the end of the month of June,
[18:59] SPEAKER_00: is that spending activity had basically returned
[19:01] SPEAKER_00: to where it would have been a year ago.
[19:03] SPEAKER_00: So, now, we all know it's not a broad brush,
[19:08] SPEAKER_00: it's grocery, then all pretty, pretty simple things,
[19:11] SPEAKER_00: not travel, but again, we just, you know,
[19:14] SPEAKER_00: we know that we're going to be seeing an uneven,
[19:18] SPEAKER_00: it's going to be bumpy no doubt,
[19:19] SPEAKER_00: but we do think that the recovery will occur
[19:23] SPEAKER_00: over the course of this year.
[19:25] SPEAKER_00: And when we go through 2020,
[19:26] SPEAKER_00: we're looking for economy to grow by 4%.
[19:29] SPEAKER_00: So that's good news.
[19:30] SPEAKER_00: Again, doesn't mean we totally recover
[19:32] SPEAKER_00: all that output loss.
[19:33] SPEAKER_00: In fact, that may not happen till mid 2022.
[19:36] SPEAKER_00: So I don't want to give anyone the impression
[19:38] SPEAKER_00: that we're expecting a surge growth,
[19:40] SPEAKER_00: but we are expecting that we're at the bottom in April
[19:43] SPEAKER_00: and we're going to climb out of that.
[19:46] SPEAKER_01: So, to some ways, what should, you know,
[19:49] SPEAKER_01: some of the business be thinking about in,
[19:52] SPEAKER_01: let's say in the recovery,
[19:54] SPEAKER_01: because I think that that's, let's be positive about this.
[19:57] SPEAKER_01: And what kind of help can they expect
[19:58] SPEAKER_01: to focus on these new opportunity segments?
[20:02] SPEAKER_00: Yeah, I mean, you know, we're trying to think of,
[20:05] SPEAKER_00: you know, how to gather our thoughts
[20:08] SPEAKER_00: to think about how we would be, you know,
[20:10] SPEAKER_00: positive as we go forward.
[20:12] SPEAKER_00: So we had kind of a five point plan that we think, you know,
[20:16] SPEAKER_00: address some of the issues
[20:18] SPEAKER_00: that are absolutely going to have to be addressed.
[20:20] SPEAKER_00: And of course, one of them is government support.
[20:23] SPEAKER_00: And there we have seen the governments
[20:25] SPEAKER_00: like all the stocks.
[20:27] SPEAKER_00: As certainly they created many, many different programs.
[20:30] SPEAKER_00: Some of them like the emergency benefit,
[20:34] SPEAKER_00: a PAMP for business,
[20:35] SPEAKER_00: can't write their for businesses about that $40,000 alone,
[20:38] SPEAKER_00: you know, some of that was forgivable.
[20:40] SPEAKER_00: No, we'll see if we continue to see pressures,
[20:42] SPEAKER_00: maybe more of that will have to be forgivable
[20:44] SPEAKER_00: as we go forward.
[20:46] SPEAKER_00: We have seen the government announce recently,
[20:48] SPEAKER_00: their intention to extend the wage subsidy programs.
[20:52] SPEAKER_00: So to the end of the year,
[20:53] SPEAKER_00: so that should be helpful to small businesses
[20:56] SPEAKER_00: who want to get some of their employees back on the payroll.
[21:00] SPEAKER_00: Of course, we also have to think about the second thing,
[21:02] SPEAKER_00: which is how do we help businesses open in the safe environment?
[21:07] SPEAKER_00: You know, what about personal protection equipment?
[21:10] SPEAKER_00: What about ensuring that they have made ways
[21:13] SPEAKER_00: to keep that physical distancing required it?
[21:16] SPEAKER_00: And some of that may require just getting together as groups,
[21:20] SPEAKER_00: joining chambers of commerce,
[21:21] SPEAKER_00: all of these really trying to figure out ways
[21:24] SPEAKER_00: that people can tap into those resources, digital networks.
[21:28] SPEAKER_00: You know, that's definitely, I think, one thing we've learned
[21:30] SPEAKER_00: is that companies that were already digitally enabled,
[21:33] SPEAKER_00: they just had that leg up in terms of others.
[21:37] SPEAKER_00: So, you know, the government is committed
[21:38] SPEAKER_00: to get high speed internet across the country, right?
[21:41] SPEAKER_00: They're going to continue to push with that,
[21:43] SPEAKER_00: but we also need to see development of entities
[21:46] SPEAKER_00: that help small businesses,
[21:49] SPEAKER_00: gal online, period, help that happen easily for them.
[21:53] SPEAKER_00: And of course, we have to think about how do we help people
[21:57] SPEAKER_00: get their supply chains if they want to aren't sure
[21:59] SPEAKER_00: how do we support that effort?
[22:02] SPEAKER_00: I mean, this idea of, you know, buy canned or buy local,
[22:05] SPEAKER_00: the other thing we looked at in other reports
[22:08] SPEAKER_00: is sort of the tourism industry.
[22:10] SPEAKER_00: You know, if people are unable to come to Canada,
[22:12] SPEAKER_00: okay, that leads a bit of a whole in our economy.
[22:15] SPEAKER_00: So how do we encourage Canadians?
[22:18] SPEAKER_00: If they're going to take time off,
[22:19] SPEAKER_00: visit other Canadians, it is fitting.
[22:21] SPEAKER_00: And so what does that tourism element look like?
[22:24] SPEAKER_00: And I guess the other aspect in the funnel
[22:27] SPEAKER_00: what would be sort of how do we help small businesses
[22:30] SPEAKER_00: who say, okay, you know, that's great,
[22:32] SPEAKER_00: but I think there's good demand for my product outside of Canada.
[22:37] SPEAKER_00: Like how do I get some support
[22:39] SPEAKER_00: to instead of just go local, go global.
[22:43] SPEAKER_00: So setting up some kind of trade accelerators
[22:47] SPEAKER_00: is sort of the fifth pillar we've suggested in our report.
[22:51] SPEAKER_01: That's cool.
[22:52] SPEAKER_01: So it's really helpful.
[22:54] SPEAKER_01: But you know, I can't finish, we've got RBC here.
[22:58] SPEAKER_01: What kind of support, are you going to provide to entrepreneurs,
[23:01] SPEAKER_01: you know, as they emerge from this crisis?
[23:05] SPEAKER_00: Yeah, well, I think, you know, when we think about the rule,
[23:08] SPEAKER_00: RBC is playing in terms of helping our companies
[23:12] SPEAKER_00: at Canadians get through this, you know,
[23:14] SPEAKER_00: definitely being very much involved in supplying financing
[23:19] SPEAKER_00: through the government's programs,
[23:21] SPEAKER_00: adding in some of the deferrals,
[23:23] SPEAKER_00: payments on things like mortgages.
[23:25] SPEAKER_00: So whether we were helping with the name or see benefit,
[23:29] SPEAKER_00: business count, EDC, BBC loans, you know,
[23:31] SPEAKER_00: facilitating getting cash to these businesses
[23:34] SPEAKER_00: who were really in a tough spot.
[23:37] SPEAKER_00: And of course, all of our advisors at RBF
[23:40] SPEAKER_00: have been trying to work with their clients
[23:43] SPEAKER_00: across the broadest spectrum that they can,
[23:46] SPEAKER_00: trying to work on solutions that will help them get from,
[23:50] SPEAKER_00: you know, this very dark place onto a strong growth
[23:55] SPEAKER_00: aside of the equation and really just get them through
[23:58] SPEAKER_00: these crises, because that's really what you want to do.
[24:02] SPEAKER_01: Don't, you know, thanks.
[24:04] SPEAKER_01: Next we're coming on account of this podcast, you know,
[24:06] SPEAKER_01: as I said, a bunch of us read the report
[24:08] SPEAKER_01: and we thought it was really good.
[24:09] SPEAKER_01: So thanks for kind of making yourself available
[24:13] SPEAKER_01: and filling in a little bit about the data.
[24:16] SPEAKER_01: Maybe just quickly let everyone know, you know,
[24:19] SPEAKER_01: how they can get the report,
[24:21] SPEAKER_01: because I certainly recommend it.
[24:22] SPEAKER_00: Oh, yes, sure.
[24:24] SPEAKER_00: Yeah, we have it on our thought leadership site.
[24:27] SPEAKER_00: So that's rbc.com, backslash.
[24:31] SPEAKER_00: Thought leadership.
[24:32] SPEAKER_00: And certainly it's on our site
[24:35] SPEAKER_00: and it is called five ways to help small businesses.
[24:37] SPEAKER_00: That's the name of the link.
[24:40] SPEAKER_00: Should you look at it for it?
[24:41] SPEAKER_00: So again, that's where you can find a report
[24:44] SPEAKER_00: and Phil, thank you so much for having me
[24:47] SPEAKER_00: and talking about our research.
[24:50] SPEAKER_00: We believe it's very, very important
[24:52] SPEAKER_00: to keep these conversations going.
[24:54] SPEAKER_01: Thanks, Don.
[24:55] SPEAKER_01: It was really informative.
[24:56] SPEAKER_01: Appreciate you coming on.
[24:57] SPEAKER_00: Thanks again.
[24:59] SPEAKER_01: Thanks for listening and watching Candace Podcast.
[25:01] SPEAKER_01: Candace Number One Business Podcast
[25:04] SPEAKER_01: by entrepreneurs for entrepreneurs.
[25:08] SPEAKER_01: I'm Philip Blist, host of the Ontario Edition.
[25:11] SPEAKER_01: See you again soon.