Jennifer Reynolds is president & CEO of Toronto Financial Services Alliance
A recent report commissioned by the Toronto Financial Services Alliance revealed that Canada's financial sector continues to be a driver of jobs and a growing contributor to Canada's GDP.
The Conference Board of Canada shows that, while many other top global financial centres have seen their employment numbers shrink over the last decade, Canada's have risen by 10.5 per cent, now employing more than 800,000 people. In terms of GDP, the sector's growth has been more robust – rising by 28 per cent over the same period, nearly double the average for the Canadian economy. Not only has the sector's growth impacted its proportion of Canada's GDP, its share of outward foreign direct investment is now 48 per cent, doubling to $505-billion since 2006.
Even better news for Canadians is that the strength of our financial sector has also fostered growth in the broader economy. While the prominence of Canada's financial sector continues to grow, it is noteworthy that it is also very often underestimated on the international stage. The fact that Toronto is the second-largest financial centre in North America and the 7th most significant globally generally comes as a surprise to people outside of Canada.
Canada is fortunate that its financial institutions weathered the financial crisis in much better condition than global peers. This stability allowed the banks to continue to extend credit and support business growth across the economy. Simultaneously, financial institutions were able to expand their international footprint, with 18 per cent of revenues for Canada's financial institutions now coming from outside of Canada. Canada's pension plans have also contributed to this growth with foreign investments representing 32 per cent of pension portfolios in 2016, up from 19 per cent in 2000.
The strength of the sector has become a key competitive advantage for Canada and, even more so, for Toronto. Financial services represent 8.5 per cent of metro Toronto employment, up 25 per cent since 2006, and 14 per cent of the city's GDP. Toronto's strong pool of talent in financial services, almost 400,000 directly and indirectly employed professionals, coupled with the region's significant pool of technology talent, has also fostered growth in the city's fintech ecosystem. This valuable pool of talent is also increasingly bringing foreign financial institutions to Toronto.
The Conference Board also highlighted the impact the sector has had on the growth and prosperity of Canada's small and medium-sized enterprises (SMEs). SMEs comprise 99.7 per cent of all businesses in Canada and are in many respects the backbone of the Canadian economy. Much of Canada's reputation as a global leader in innovation is attributed to the opportunity that SMEs have to prosper. What is frequently lost in the narrative is the key role financial institutions play in the successful exploitation of the opportunities that Canadian SMEs represent.
The financial sector extended $243-billion in credit to SMEs last year, up 25 per cent since 2011, primarily in the form of loans for working capital and capital investments. SMEs also raised $21-billion in capital on the TSX venture exchange in 2016 providing larger equity investments for companies later in their development. Insurance, payments processing, risk management and trade services and expertise are also critical financial services that support SMEs. Without these services, a modern, dynamic and resilient economy is impossible.
All of these elements have increased the prominence of Canada's financial sector and Toronto's ranking as a leading global financial centre. The question is why is this strength not better appreciated internationally? In the context of this recent score card for the financial sector, combined with the open and stable social and political environment in Canada, there is a unique window to attract capital, business and talent to the sector, and especially to Toronto.
As innovation continues to change the competitive landscape in the industry, capitalizing on bringing new talent and investment to Canada can only increase the industry's ability to maintain competitiveness and continue to foster growth, and strengthen this sector's important role in the economy. While it may challenge our Canadian tradition of modesty, now is the time to seize this opportunity to promote the international prominence of the Toronto financial centre and put to rest any misconceptions about Canada's role in the global financial landscape.