Canada’s mid-sized companies, a key economic engine, saw their numbers decline by 17% – 9,370 to 7,814 – from 2006 to 2010, shows a study by the Business Development Bank of Canada (BDC).
Hardest hit was the manufacturing sector, which saw over half its mid-sized firms vanish between 2001 and 2010 from 2,807 to 1,381.
“This decline should signal a call to action as mid-sized firms are vital to the Canadian economy,” says Pierre Cléroux, BDC vice president, research and chief economist and lead author of the study. “They’re few in numbers, yet their contribution to Canada’s economic prosperity cannot be overemphasized. They really do punch above their weight.”
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The study, which aims to fill an important research gap on mid-sized firms, is one of three that the BDC plans to release this year on economic issues of importance to Canadians.
Mid-sized firms represent 1% of the total number of companies, but contribute disproportionately to the Canadian economy, accounting for 16% of Canadian jobs, 12% of GDP and 17% of exports.
A greater portion of mid-sized firms have their head office in Canada, compared to large firms (90% versus 77%).
“During the last ten years, medium-sized firms have faced serious challenges from the rapidly appreciating Canadian dollar, financial crisis and recession,” adds Cléroux. “Canadian businesses will continue to face major challenges as competitive pressures will not disappear.”
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The study also found 14% of mid-sized firms became small firms or closed down each year from 2006 to 2010. Ontario was hit worst, losing 25% of its number of mid-sized firms during that period.
Only 1.4% grew to become large-sized corporations with 500 or more employees. On the more positive side, the study found many CEOs are optimistic about their prospects during the economic recovery, with 64% of mid-sized firm leaders saying their annual sales will go up by 4.5% over the next three years.
Firm owners said the main obstacles standing in their way to becoming large companies are fierce competition, availability of financing and employee acquisition and retention.