Small business fared well in 2003, but taxes remain top-of-mind for small business owners.
Ottawa Business Journal reporter Ellen Tsaprailis discussed the local economy, the year in review and predictions for 2004 with Stephen Daze, executive director of OCRI's Entrepreneurship Centre.
THE BACKGROUND: "Despite everything, I think the local economy fared very well. We saw SARS, we had mad cow (disease) here in Canada, the power outage, war in Iraq, a slowdown in terms of the investment dollars by venture capitalists in Ottawa and we saw a bit of an increase in bankruptcies overall in the Ottawa region.
"On the surface, there are a lot of negative forces and factors that were pushing in a negative way on the Ottawa economy. With that said, we've had a very solid economic year and I think this bodes very well for what's happened with Ottawa businesses."
THE GOOD NEWS: "Housing starts are extremely strong, some of the strongest in the country, although showing some signs of slowing. There has been good job growth in the region. Unemployment in the region is lower than the national average.
"The number of technology firms continued to rise to the point where we're at about 1,500 different technology companies. Even in some of the worst economic conditions, the number of firms continued to rise. The Ottawa downtown office market is one of the best performing real estate markets in Canada and, when you look at the Conference Board of Canada, we are seeing them predict an even stronger growth in the Ottawa economy overall.
"In terms of overall small businesses, we're probably seeing the same, very similar numbers to last year, so we have not seen a net change necessarily either for or down."
THE BAD NEWS: "We saw some factors that weren't necessarily controllable have an impact – SARS, power outage, war in Iraq and the technology downturn that we're still feeling the effects from.
"Obviously, technology companies are closing doors still and, in many cases, laying off employees. We're starting to see company bankruptcies up again. There is the line of thinking that suggests increases in bankruptcies usually come at a time when people are doing very innovative things in the marketplace.
"Again, I would come back to a lot of these bad factors such as technology layoffs and closing of technology companies and, although they have a short-term negative impact, they do have some potential upside to them and that is with respect to layoffs – I see it as the glass is half full. It's a healthy redistribution of a very talented labour pool among smaller emerging technology companies. What we see through the Entrepreneurship Centre is a number of very small technology companies who are still flying below the radar but they are doing some very positive things.
"They are not getting the big splashy financing of a couple of years ago that consumers in the media gobbled up. What they are doing is old-fashioned bootstrapping and old-fashioned growing of companies and that is engaging clients at an early stage and selling their product and service."
THE BIG PICTURE: "We're starting to see some good signs on the technology side. Software has continued to be strong for the Ottawa economy. We're starting to see some positive things in the microelectronics side and that usually is an early indicator of what's happening in the marketplace.
"We see some good early positive indicators. What we're hearing from some of the investors out there is that the bad times might be over and they are starting to at least think they see some light at the end of the tunnel, which is very good news. I think 2004 is going to be more positive, providing we don't see as many uncontrollable factors as we did this year.
"I would suggest that we should go into 2004, although cautiously, very optimistic. In terms of the minimum wage increase and hydro increase, I would suggest that those costs are going to be passed directly on to the consumer in almost all cases and the larger question there then is what is the ability for those price increases to be absorbed by the average consumer.
"Consumer spending still remains high so I would suggest that there's a good likelihood that those increases may be absorbed effectively by the end consumer, but it's a wait-and-see kind of thing. City deficit may be an issue; on the positive side they might download some of the services to the private sector, on the negative side funding for things like festivals may be at least partially in jeopardy, we don't know.
"We don't know whether or not council will ultimately decide if taxes do have to be increased, so that's a bit of a wild card as well."
Ellen Tsaprailis can be reached at ellen.tsaprailis@transcontinental.ca
