BC Progress Board | 2007 Benchmark Report | Performance Indicator 9: Business Investment

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Performance Indicator 9: Business Investment

Where BC Ranks, Provincial Comparison

(Updated May 6, 2008)

Year	1998	1999	2000	2001	2002	2003	2004	2005	2006	2007
Rank	4	5	7	6	5	5	5	3	4	4

Performance Indicator Nine measures the expenditure by businesses on durable assets and on building and engineering construction plus residential construction by individuals.

In 2007, BC ranked third in Canada in Business Gross Fixed Capital Formation (GFCF), up from fourth place in 2006. The improvement was due to lower investment in Newfoundland and Labrador, not BC growth.

Note: The preliminary estimate for 2007, upon which this update is based, will be revised when final data are released in the fall. The fall release will also include a historical revision of 2004-2006 data.

Why It's Important
Business investment is perhaps the most important factor contributing to long-term economic growth and higher productivity. Without solid business investment, significant or sustained employment growth is unlikely. Periods of strong business investment are generally followed by faster economic growth and rising incomes. Factors such as input costs, market conditions, expected rates of return, and government fiscal policy determine a jurisdiction's attractiveness for fixed business investment.

Provincial Comparison — Non-Residential Business GFCF

Year	1997	1998	1999	2000	2001	2002	2003	2004	2005	2006
Rank	6	8	9	9	6	6	7	7	6	7

Removing residential construction from the analysis yields Non-Residential Business GFCF.

In 2007, non-residential business investment was equal to 12.4 percent of BC's GDP, below the Canadian average of 14.5 percent. Alberta led the pack with investment equal to 29.0 percent of GDP.

International Comparison

British Columbia is a middling performer on Total Gross Fixed Capital Formation as a percent of GDP when compared to OECD countries. In 2006, BC's ratio of 23.3 percent earned it a rank of 10th.

This comparison considers total gross fixed capital formation rather than investment by the business sector only as in the provincial comparison. This is necessary because only half of the OECD countries report separate business sector investment.

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