David Herle is principal and Alex Swann is vice-president of the Gandalf Group.
Since the start of the C-Suite survey over five years ago, one of the most interesting dynamics has been the difference in attitude, expectation and need between Canada's two largest business centres: the West, anchored by Alberta's oil and gas companies, and Ontario, once anchored by its manufacturing sector.
For only one extended period over the past five years have executives in both the West and Ontario shared roughly similar outlooks for the economy and their companies. That was in the first half of 2009 as the country came to grips with the depths of the recession.
It is not just that the Western economy is stronger than the Ontario economy. The divergence is growing. In percentage terms, the number of executives with strong growth forecasts for their companies has tended to be more than 10 points higher in the West compared with Ontario since 2009.
There are two major factors underlying this difference: the weakness of manufacturing and the stunning growth in resources and commodities. More than 60 per cent of resource executives expect their company to grow strongly this year. By contrast, the recession is not over in all elements of the manufacturing sector. One in 20 of the largest remaining manufacturing companies expects a further decline in their fortunes this year.
The Ontario economy is no longer defined by "making things." It is now primarily a service economy, though it, too, has an important resources component. Yet executives from all sectors believe that if we aren't manufacturing things, we will have a weak economy.
The differing circumstances lead to different policy demands from Ontario and the West. Ontario executives are more concerned about government deficits (likely because of the provincial situation) but less desirous of a concerted attack on deficits right now. They want the government to be investing in the economy in a strategic way.
Executives across the country are united against populist spending or initiatives in the anticipated federal budget. But Ontario executives, especially at the beleaguered manufacturers, are looking for further spending on infrastructure and transportation, money for R&D, investments in renewable energy and clean technologies as well as planned corporate tax cuts. They are strongly supportive of anything that will smooth transit through the Canada-U.S. border.
Executives in the West meanwhile are hiring, and actually concerned about skilled labour shortages. Their budget priority is investment in education and training.
This quarter's survey also speaks to how many of the shocks that continue to affect the economy seem beyond the scope of government to help. Ontario-based executives see their companies as threatened by a host of challenges global in nature: rising energy prices, the potential for inflation and higher interest rates, weakness in the U.S. economy, high levels of consumer debt, and most damagingly, the high level of the Canadian dollar.
Executives are not simply concerned about sluggish growth or looking only at measures to increase growth. Many are keeping their eye on other forces which speak to vulnerability and fragility in the Ontario economy.