A decline in spending by large and foreign firms dragged down investment levels in Canada over a decade and a half, according to a Statistics Canada study that provides new insights into the country’s productivity problem.

The topline: In 2006, companies invested $3,573 per worker on buildings, machinery, intellectual property and other assets, the study found. By 2021, that figure was $628.80 lower, or nearly 20 per cent. 

The bigger they are: Large firms employ over a third of all workers, and invest the most. So their cutbacks over the 15-year span had larger impacts, making up 70 per cent of the drop. Mid-sized firms accounted for another 22 per cent. Foreign-controlled firms also invested less than ones headquartered here; the StatCan authors noted that resource-sector reductions in response to plummeting commodity prices might explain both trends.

In recent weeks, Finance Minister Chrystia Freeland has called for firms to put more money into the economy, touting the recent inflow of foreign direct investment. “We’d like to see more Canadian businesses investing more in Canada,” she said earlier this month. Business Council of Canada CEO Goldy Hyder fired back that Ottawa needs to first take down regulatory barriers.

Money for nothing (tangible): When firms did invest, they put more of their money into assets like patents and the value of their brands. In 2021, intangibles accounted for 17.3 per cent of companies’ balance sheet assets, up from 8.4 per cent in 2006. 

Foreign firms led the way in boosting spending on intangibles. Internationally held companies grew such assets from 10.7 per cent to 26.4 per cent of their total over the 15-year span, while domestic ones only jumped from 7.8 per cent to 14.4 per cent. Some innovation-economy executives argue that kind of investment doesn’t deliver the same spinoff benefits to the Canadian economy that, say, a foreign firm building a factory here would.

What’s next: Investment intentions are on the decline. Desjardins chief economist Jimmy Jean expects 2024 to be “a pretty sluggish year,” as businesses worry about consumer spending and rate hikes. While policymakers are expressing a sense of urgency to boost productivity growth, it’s been a “serial disappointment over many decades,” he said, suggesting governments give firms more clarity on energy-transition incentives and address interprovincial trade barriers.