Unlocking Atlantic Canada’s Growth Potential in Manufacturing

The world of manufacturing is transforming. Technologies like 3-D printing, advanced robotics and the Internet of Things are disrupting established ways of doing business, sparking a dramatic leap forward in innovation, product development and process efficiency. For manufacturers in Atlantic Canada, this can be either a threat or an opportunity. Businesses that embrace advanced manufacturing technologies and analytics will enjoy dramatically lower production costs, quicker product development times, and the flexibility to create innovative new products to meet changing customer demands. Those that do not will find it ever more difficult to meet the quality, cost and operational requirements of their customers.

Strategic investment in innovation and technology adoption is the starting point on a virtuous cycle that ultimately leads to more output, employment and economic growth across Atlantic Canada. Innovation and investment in new technologies improve business productivity. That, in turn, helps businesses become more competitive in domestic and international markets. More competitive businesses attract more production mandates and capture more market share, resulting in higher output and exports. Higher output leads to greater firm profitability, which leaves businesses with more money to invest in innovation and new technologies.

This report outlines a strategy to get Atlantic Canadian manufacturing onto this virtuous cycle. Since businesses drive investment, that strategy focuses specifically on business needs, concerns, opportunities and solutions.

The Atlantic region lags other parts of Canada in both technology adoption and innovation in manufacturing. According to the results of CME’s 2018 Management Issues Survey, only 29 per cent of manufacturers in the region currently use advanced manufacturing technologies, compared to 40 per cent nation-wide. Meanwhile, data from Statistics Canada’s Survey of Innovation and Business Strategy show that, while the gap has narrowed in recent years, Atlantic Canadian manufacturers have the lowest reported innovation rates in the country, with the widest gaps in product and process innovations.

At the same time, Canada as a whole ranks poorly in these areas compared to other advanced economies around the world. Most importantly, there is a wide gap in investment growth trends between Canada and the United States. From 2006-2016, US manufacturing investment in new equipment rose by 20.5 per cent while in Canada it fell by 16.9 per cent.

Underinvestment in machinery, equipment and technologies is a major factor behind Canada’s lagging productivity growth in manufacturing. Over the last 15 years, labour productivity in Canadian manufacturing has increased by about 20 per cent, compared to nearly 50 per cent in the US and more than 100 per cent in locations like South Korea, Taiwan and Eastern Europe.

And since the Atlantic provinces have lower rates of innovation and technology adoption, productivity levels in the region are behind the national average. The Maritime Provinces have the lowest manufacturing productivity rates in the country. Productivity levels are considerably higher in Newfoundland and Labrador but, even so, remain about 8 per cent below the national average.