Ottawa businesses are giving the federal government budget an overall positive grade, but local government relations firms say their clients aren’t getting too excited just yet.
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Ottawa businesses are giving the federal government budget an overall positive grade, but local government relations firms say their clients aren’t getting too excited just yet.
Marci Surkes, chief strategy officer at Ottawa’s Compass Rose, said the federal government set high expectations early on, teasing a budget that would feature “once-in-a-generation-type investments.”
But while areas like defence hit the mark, she said the budget lacked specificity in other areas, which will keep businesses cautious for now.
“I think it’s difficult to discern at this early stage just which of the investments in this very massive budget document are going to land most favourably for the government,” she told OBJ Wednesday. “There aren’t as many singular, marquee pieces. I was anticipating the budget being a little bit more focused. On my read, it reads a little bit more broad-based than what they were forecasting in terms of spending.”
Surkes said she’s hearing cautiously optimistic rumblings from Ottawa businesses involved in housing, supply and construction, with the budget earmarking $25 billion for housing and $115 billion for infrastructure. While the language in the budget is positive, she said businesses remain hesitant as they wait to get a more detailed look.
Over the next five years, $81.8 billion will be invested in defence, creating opportunity for companies within that sector. With defence spending on the rise, Surkes said the local tech sector will be pushing to provide dual-use products and software that the government can use for both civilian and military purposes.
“It’s an extremely consequential investment and rises to the geo-political moment that we find ourselves in,” said Surkes.
As companies begin competing for defence contracts, Surkes said she’s expecting “a bit of a Hunger Games moment.” Ottawa companies, she added, will be in the fray.
“I think Ottawa-based firms need to be, and should be, at the forefront of what the Defence Investment Agency is going to accomplish over the next year,” she said. “I also think there’s a healthy dose of competition at play that’s going to be tough to navigate.”
On the other side, the federal government is projecting $44 billion in savings as a result of federal public service cuts. This year could see 16,000 job cuts, and a total of 40,000 — 10 per cent of the workforce — by 2029.
The cuts have created anxiety among not only the public service, but the private sector as well, according to Cyndi Jenkins, vice-president of public affairs for government relations and communications firm Burson Group in Ottawa.
“I think we’ll have to keep an eye on it and everybody will be watching,” she said. “What does that mean for services? What does it mean for response times when we’re looking for answers? Will it affect the ability to get dollars out the door? I think it comes down to those details and how strategic the public service cuts are going to be.”
While the cuts are less drastic than expected, Surkes said they would disproportionately impact Ottawa, where nearly 50 per cent of the federal public service is based. As a result, Surkes said treating the city as Canada’s new defence hub could offset the impacts.
“The mayors (of Ottawa and Gatineau) are both now aggressively positioning Ottawa as the defence and tech hub,” she said. “That made sense before the budget and now that we know the magnitude of these cuts, it’s all the more reason for Ottawa to keep positioning itself that way. Everybody has to be clear-eyed about this. Being able to pivot into defence, tech and security — I think that’s never been more important than now.”
The budget, which totals $280 billion in spending over five years, puts $115 billion toward infrastructure and $110 billion toward productivity growth.
With U.S. tariffs continuing to loom, other measures in the budget aim to diversify trade and make Canada more attractive. As some Canadian companies look to move south to avoid trade costs, the measures are meant to encourage domestic businesses to stay in Canada. The marginal effective tax rate, for example, will decrease to 13.2 per cent from 15.6 per cent.
Gavin Miranda, the Ottawa-Gatineau regional tax leader for national accounting firm MNP, said such incentives “supercharge” the budget.
He also pointed to a new write-off for the manufacturing and processing of buildings, which he said was a cornerstone of the budget.
“If someone does a manufacturing or processing build-out or alterations to a building, they can write off 100 per cent of that building in the year that it’s available for use,” he said. “That’s a massive amount of tax relief. The question, in and around Ottawa and the Valley, is where we’ll be able to draw that investment here to take advantage of it.”
Also in the budget are previously accelerated investment write-offs for things such as equipment, computers and patents that will be continued or reintroduced. The expenditure limit for the government’s Scientific Research and Experimental Development (SR&ED) tax incentive program has also been increased, which Miranda said makes the program more accessible and valuable to smaller companies.
“That’s going to have a big benefit, where people are now investing in capital assets to do SR&ED,” he said. “The defence spending component is going to fuel a lot of growth if we take that opportunity in Ottawa. In that spending with the SR&ED program, innovation through capital expenditure will all help drive that growth and give benefits to those investors.”
