BC Progress Board | 2007 Benchmark Report | Performance Indicator 9: Business Investment

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Performance Indicator 9: Business Investment

Where BC Ranks, Provincial Comparison

Year	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
Rank	7	6	5	5	5	3	4	3	4	4

Performance Indicator Nine measures the expenditure by businesses on durable assets and on building and engineering construction plus residential construction by individuals.

British Columbia, and to a lesser extent Canada, experienced solid growth in business GFCF through the early part of this decade. It has been flat since 2006, however.

BC has had above-average business GFCF for the last three years, as it did in the 1990 through 1997 period. Gross fixed capital formation in the business sector was below the national average for all but one year between 1998 and 2005.

Why It's Important
Business investment is perhaps the most important factor contributing to long-term economic growth and higher productivity. Without solid business investment, significant or sustained employment growth is unlikely. Periods of strong business investment are generally followed by faster economic growth and rising incomes. Factors such as input costs, market conditions, expected rates of return, and government fiscal policy determine a jurisdiction's attractiveness for fixed business investment.

Provincial Comparison — Non-Residential Business GFCF

Year	1999	2000	2001	2002	2003	2004	2005	2006	2007	2008
Rank	8	9	9	6	6	7	7	4	5	5

Removing residential construction from the analysis yields Non-Residential Business GFCF.

In 2008, non-residential business investment was equal to 13.3 percent of BC's GDP, below the Canadian average of 14.5 percent. Alberta led the pack with investment equal to 29.1 percent of GDP.

Between 1999 and 2008, BC saw an average annual increase of 2.9 percent in non-residential business investment. This was above Canada's average growth and earned a fourth-place rank.

International Comparison

British Columbia is a middling to strong performer in Total Gross Fixed Capital Formation (GFCF) as a percent of GDP when compared to OECD countries. BC’s ratio of 25.4 percent in 2008 earned it a fifth-place rank, up two places from its position in 2007. Canada ranked tenth of 31 with a ratio of 22.6 percent.

Note
This comparison considers total gross fixed capital formation rather than investment by the business sector only as in the provincial comparison. This is necessary because only half of the OECD countries report separate business sector investment.

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