Canada’s recently announced industrial strategy has been welcomed as a bold attempt to spark new investment and generate long-term job growth. But as the government rolls out its Build Canada vision, a deeper structural issue is being overlooked — the country’s persistent collapse in business investment.
For nearly two decades, Canada’s economy has suffered from weakening productivity and shrinking investment levels. What was once described as a productivity “gap” with major global competitors has now widened into what economists warn is an economic “abyss.”
Data comparing business investment between Canada and the United States shows a stark decline. From 2006 to 2021, Canadian investment per worker dropped 20 percent relative to U.S. levels. A decade ago, Canadian firms invested 79 cents per worker for every U.S. dollar spent. By 2021, that number had plunged to just 55 cents.
The trend is even more troubling when looking at foreign direct investment. Outflows of Canadian capital have consistently exceeded inflows for years, creating a widening imbalance. In 2006, outbound investment surpassed inbound flows by 19 percent. By 2016, the gap had grown to 36 percent. Last year, it jumped again — reaching a staggering 65 percent.
Reversing these trends will be essential if Canada hopes to rebuild its economic strength. But doing so requires more than new industrial strategies. It demands a complete shift in how Canada supports business growth and attracts investment.
Businesses, both domestic and international, move capital where returns are higher and regulatory barriers are lower. When operating costs rise or uncertainties multiply, investment flows elsewhere. For Canada to become a competitive destination again, the environment must be predictable, efficient, and investor-friendly.
One critical step is simplifying the country’s complex regulatory framework. Establishing a single, time-bound approval system for major projects is a positive move — but only if it is backed by assurances that future regulations won’t derail developments mid-stream. Investors have faced such disruptions before, and many remain wary.
Long-term confidence also hinges on political stability. Projects that take years to build require assurance that future governments will not reverse approvals or halt development once construction begins.
However, regulatory reform alone will not fuel the level of investment needed. Canada’s tax environment has become increasingly uncompetitive, making it harder for businesses to justify large-scale investments. Addressing this challenge may require a fundamental rethinking of the tax system — shifting it from a revenue-extraction tool to one aimed at stimulating economic growth.
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This includes reviewing mechanisms such as flow-through shares, investment tax credits, and refundable ITCs to determine whether they can better support capital attraction in high-growth sectors.
But the responsibility cannot fall solely on government. Canadian businesses themselves must take a more aggressive role in driving innovation and expansion. For years, many firms have prioritized stability over growth, leaving the country trailing its global peers. In today’s rapidly changing economic landscape, this caution risks long-term stagnation.
The disruptions Canada faces are not distant threats — they are immediate challenges that demand urgent action. With the right mix of government policy, business ambition, and competitive reform, Canada has the capacity to reclaim its position as a global economic leader.
The moment to act is now.
