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What 'dead money'? Businesses boosting capital investment: survey

Steam Whistle worker Claudia Prietor loads empty beer bottles on a conveyor belt for the bottle washer. A new study by the Business Development Bank of Canada found that 56 per cent of businesses plan to invest in the coming year, mostly in new machinery and equipment, with the most common goals being to boost productivity and develop new markets.

Mark Spowart/The Globe and Mail

For those fretting over dead money and Canada's poor productivity record, there is a glimmer of hope, with a majority of businesses saying they will boost capital investment in the coming year.

More than half of businesses in a new survey say they plan to make productivity-enhancing investments, such as buying new equipment, in the next 12 months. Most firms that aren't planning on a big investment would like to, but cite constraints in working capital, access to credit and caution over an uncertain global economy.

The study, to be released by the Business Development Bank of Canada on Monday, asked small and medium-sized firms across the country whether they plan to invest over the next year, and if so, in which areas.

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The agency commissioned the survey after a heated debate this August over whether firms were hoarding cash, or sitting on "dead money," as Bank of Canada Governor Mark Carney put it, a point some business leaders and economists rebutted.

The poll found that 56 per cent of businesses plan to invest in the coming year, mostly in new machinery and equipment, with the most common goals being to boost productivity and develop new markets.

This shows "Canadian businesses want to invest, more are going to, and of those that aren't, it's really because they don't have the ability," said Pierre Cléroux, BDC's chief economist.

Mr. Cléroux urged businesses to do more. "The timing is good," with low borrowing costs, a stable domestic economy and as a strong currency makes imports more affordable. In particular, companies should be buying equipment that speeds up production, and makes customization of goods easier.

Of these smaller businesses, about half plan to invest $100,000 or less in the next year, while one in five entrepreneurs aim to invest more than $500,000.

The survey, conducted with Market Intelligence group with 513 respondents, is being released at the start of small business week.

It comes as the level of entrepreneurship in Canada has dwindled, separate research by the agency has found. A study it published earlier this month found the level of entrepreneurial activity in Canada last year hasn't recovered from the recession, and is at its second-lowest level in 12 years.

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"The slow economic recovery appears to have discouraged risk-taking on new business ventures," Mr. Cléroux said. "This is a concern because entrepreneurship is an indicator of economic dynamism, creates jobs and drives innovation."

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About the Author

Tavia Grant has worked at The Globe and Mail since early 2005, covering topics from employment and currency markets to trade, microfinance and Latin American economies. She previously worked for Bloomberg News in Toronto and Zurich, writing on mining, stocks, currencies and secret Swiss bank accounts. More

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