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Canada best country for SMEs

Christian Fernsby |
Euler Hermes announced its 2019 SMЕ Business Climate Index (SMEB) in which it assessed Canada as the best country for SMEs to operate in.

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Of the 13 economies surveyed by the Euler Hermes Economic Research Department, SMEs enjoy a very favorable business climate in Canada and a favorable one in the U.S., the Netherlands and Singapore.

These economies have in common a flexible labor market in terms of hiring and firing procedures, a low level of red tape and relatively good financing conditions.

Small- and medium-sized enterprises (SMЕs) are crucial for еcоnоmic growth and prosperity worldwide.

SMEs account for the majority of businesses: according to the Government of Canada, small businesses make up about 98% of all businesses, with SMEs employing approximately 90% of all employees.

The SMEB helps SMEs understand the business environment in their domestic market or in a potential export market better and supports them in their decision-making.

It's based on six components: red tape, tax policy, labor market flexibility, financing, export opportunities and competition.

When comparing the rankings, it turns out that SMEs especially in Canada, the U.S., the Netherlands and also Belgium face comparatively less constraints compared to an average company.

Positives for Canadian SMEs include corporate taxes.

While the base rate of 28% is a bit higher than the average for this study of 23%, the rate on SMEs is only 9%, tied for the second lowest.

And the difference between those rates of 19% is the highest among the economies studied, giving Canadian SMEs a distinct advantage over their larger counterparts.

Financing is also a significant benefit for SMEs.

Low interest rates provided by the Canada Small Business Financing Program, and other financing available, provide significant access to credit.

Export opportunities in Canada appear to be the most detrimental components of the SMEB.

Over 30% of Canadian GDP is derived from exports, but approximately 80% of that goes to the U.S. alone.

Therefore the export sector is heavily dependent on the health of one economy, and diversifying into other export markets would be greatly beneficial.

But this has proven difficult since so many supply chains have already been established between the U.S. and Canada.

There is a trade feud between the two countries with some tit-for-tat tariffs, and eliminating them would be greatly beneficial to Canadian trade.

Crude oil is a significant export, but getting the oil out of the ground and into the hands of foreign consumers has proven difficult.

A more reliable and comprehensive pipeline infrastructure would be most helpful.

The recent formation of the Comprehensive Economic and Trade Agreement (CETA) will open 27 markets and over 500 million consumers to Canadian exports through tariff-free trade, but it has yet to be fully ratified and implemented.

It will provide a valuable boost to exporting when it is fully operational.

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