Your Canada business update – September 2022

Despite the current economic challenges, Canada and the United Kingdom maintain a strong economic relationship, with centuries of  shared political history.

Canada offers British companies a stable and predictable investment environment, strong fiscal fundamentals (the lowest net debt in the G7), consistently low unemployment, and a competitive tax environment – not to mention the strong links to the rest of the global economy, having negotiated free trade agreements with 65% of the world’s consumers.

UK-Canada trade remained incredibly strong during the course of the pandemic. Both sides have also committed to deepening economic ties through an upgraded and modernised free trade agreement (FTA), which began in March 2022. The two sides have also explored opportunities to improve cooperation in areas outside the framework of FTAs such as supply chain security and renewable energy flows.

The CBI North America office travelled to Ottawa this summer to engage with Canada-based CBI members and the UK High Commission in Ottawa about their priorities for a renewed UK-Canada FTA.

Professional Licensing

Labour shortages, especially the lack of skilled workers, were a top issue of discussion, as UK firms have struggled to convince Canadian officials about the need for global expertise to grow their business within Canada.

Professional licensing restrictions in Canada have made this a major challenge, despite the Canadian business community’s interest in the UK’s economic dynamism and innovation. Inter-provincial regulatory barriers also frequently hamper UK businesses, who can’t easily transfer staff across borders in fields like architecture or medicine to take new jobs.

Members in the room noted that licensing challenges have direct impacts on other areas of investment, such as government procurement, as UK services firms cannot bid for projects unless partnered with a local firm or if licensed by a local regulator.

Infrastructure and Defence

Members also discussed the importance of promoting UK expertise in the Canadian aerospace and defence sector, especially at a time when the Canadian government is spending an extra $8 billion on defence over the next five years.

Additionally, members spoke of long-term opportunities in building out Canadian infrastructure thanks to unplanned population growth that has stretched out Canadian cities beyond their original footprint. This provides opportunities to invest in contracting for public services like wastewater treatment, railways, roads, and healthcare centres.

Supply Chain Security

Of late a major focus area, the CBI International Team discussed areas in which the UK could work with Canada to prevent supply chain disruption in future crisis.

Customs cooperation, such as expanding Canada’s threshold for low value mail shipments (currently the lowest in the industrialised world), would be an ideal place to start. As Canada raised their threshold from C$20 to C$40 as part of the USMCA negotiation with the United States and Mexico, a UK-Canada FTA should look to pursue similar terms to ease global trade.

Critical minerals

The CBI North America team also discussed with members areas where the UK could benefit from Canada’s expertise in this sector, and the high volume of mineral deposits – and where the two economies could collaborate with Canada on R&D to make mineral extraction a cleaner and safer process.

While the UK is already Canada’s second largest mineral and metal export market, there’s still more opportunities for UK firms to invest in emerging materials critical to the energy transition – such as the lithium sector in Quebec.

The 2022 Canadian budget announced $3.8 billion over 10 years for its own Critical Minerals Strategy, designed to accelerate exploration and make it less risky for business. It also doubled the Canadian exploration tax credit to 30% for metal projects related to electric vehicle production. With the UK’s own critical minerals strategy launched on 22 July, UK firms should increasingly see Canada both as a long-term opportunity and a model for best practice in this sector.

For more information about the CBI’s work on UK-Canada trade, please contact John Bleed. If your business is interested in getting involved with this work or would like introductions to the UK Embassy in Ottawa or DIT officials in North America, please let us know.