Concern heightened among Canadian manufacturers over US protectionism
Outlook 2019 study shows they’re expecting business to be good, but confidence has tumbled since last year.
TORONTO — Canadian manufacturers are optimistic about their prospects in 2019, but significantly less confident than last year as concern mounts that Trump administration policies and other disruptive factors will affect their businesses, according to a new survey of senior manufacturing executives.
PLANT Magazine’s Manufacturers’ Outlook 2019 study shows 39% of senior company executives are very optimistic about the coming year, compared to 44% last year.
They’re either very or somewhat concerned about what’s going on in America. US protectionism is very worrying to 65% of executives compared to 54% last year, followed by US protectionism (65%), US President Donald Trump’s impact on nation-to-nation relationships (61%) and changes resulting from the NAFTA renegotiation (56%).
“Canadian manufacturing has been booming, but there are storm clouds on the horizon and that’s eroding Canadian CEOs confidence in 2019,” said Jeff Brownlee, publisher of PLANT Magazine, which commissioned the survey.
How are companies staying ahead of the risks? Two-thirds (66%) are conducting assessments, 29% regularly and 37% sometimes. Regulatory change leads the list of concerns for 41%.
“It is true the world is changing fast, and in today’s exciting but uncertain times, PLANT Magazine’s annual Manufacturers’ Outlook survey has never been more significant,” said Rob Riecken, National Leader, Manufacturing & Distribution, Grant Thornton LLP. “Manufacturers’ Outlook 2019 provides Canada’s manufacturing businesses with material that will help them to brave uncharted waters. We firmly believe these businesses have the ability to adapt to this new era, and in new innovative ways.”
Despite their concerns, manufacturers are demonstrating their confidence with plans to make significant investments in their businesses.
Top choices for investment over the next three years are machinery, equipment and technology (75% of respondents) and training (63%). Average investment is more than $1.7 million.
More than half of the senior executives (55%) expect sales to increase (an average 12%); 60% predict orders will increase (13%) but costs will also increase (9%). Pricing will rise for 54% averaging 8%. Thirty-five per cent see profits rising (11%).
Controlling costs tops the list of challenges for 65% of respondents, followed by pressures on prices (61%) and filling skills needs/management talent (46%).
Companies lag in the adoption of advanced measures and technologies that would improve productivity. Only 33% make use of automatic data access, analysis and review to measure and monitor productivity; 43% do it manually; and 8% don’t measure.
Respondents demonstrated a very limited engagement with IIoT, which connects and optimizes machines via the internet. Only 7% are applying IIoT capabilities, 32% are not familiar with these capabilities and 31% said they were not applicable.
“Customers are now driving the demand and pushing for more customization, smarter products and better delivery. It’s concerning that so many manufacturers are not adopting digital manufacturing technologies because those who do benefit from quantifiable gains in production efficiency, competitiveness and flexibility to respond to market demands,” said Dale Kehler, senior vice president, product services, SYSPRO Canada.
This year’s survey added questions about corporate culture – the values, beliefs and attitudes that characterize a company and guide its practices – as part of a formal business strategy. Most companies (28%) include a formal program and/or policies, 24% have an informal program in place and 23% are working on it, while 26% aren’t doing anything.
Other highlights from the survey:
- 67% of companies report most revenue comes from Canada, the US (23%), Europe (2.9%), Mexico (1.9%) and China (1.3%).
- Companies entering new markets over the next three years are favouring the US (29%), Canada (26%) and Mexico (13%).
- 48% of executives cite a growing risk of cyber attacks aimed at industrial targets as a medium concern. More than half (57%) haven’t experienced an intrusion but 21% were attacked within the last year. Sixty-two per cent cite phishing as the most common breach.
- 57% of respondents are focusing products, processes (56%) and technologies (47%).
- The average innovation spend for 2019 will be 3.6% of revenue but 49% do not intend to take advantage of the SR&ED federal tax credit for investment in research.
The survey, conducted by Toronto research firm RK Insights, has a margin of error of +/- 3.6%, 19 times out of 20.
Most of the surveyed companies (66%) fall into the small business category (under 100 employees); 23% are medium-sized (under 500); and 11% are large (500 or more).