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Setting the record straight: Canadian businesses doing their part to drive economic growth, says Myers

Published by Derek Lothian on August 24, 2012

The head of the country's largest trade and industry association is refuting recent comments attributed to Bank of Canada Governor Mark Carney that Canadian companies are preferring to hoard cash rather than invest in business growth.

According to Jayson Myers, president and CEO of Canadian Manufacturers & Exporters (CME), business investment in productive capital assets like structures and equipment has increased significantly since the recession.

For companies in Canada's non-financial sector, the net value of the capital assets they have invested in has increased by more than $240 billion since 2008. As a result, manufacturers have seen the net value of their capital stock jump by $40 billion over the past four years.

"It's true that businesses are holding more cash," explains Myers. Cash and short-term deposits have increased by $60 billion across the non-financial business sector, and by $10 billion in the manufacturing sector, since 2008.

But, as Myers points out, cash now comprises only a slightly larger share of total assets than four years ago, and there are good financial reasons for businesses to hold more cash.

For example, the value of other short-term assets like accounts receivable and inventories has dropped, while short-term borrowing and other liabilities have increased.

"In the current economic climate, holding more cash is a good asset allocation decision; it is certainly not an indication that companies are wasting their money or that they have not been focusing on investments to grow their business or boost productivity," he says. "In spite of intense competitive pressures and a strong dollar, Canadian businesses, and manufacturers in particular, know that capital investment is essential to their survival.

"Manufacturers have benefited from a lower tax rate and a two-year write-off for their investments in machinery and equipment. We are certainly seeing the benefits of recent tax reforms in today's high risk business environment."


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