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What does the 2022 budget do for kitchen cabinet manufacturing in Canada?

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What does the 2022 budget do for kitchen cabinet manufacturing in Canada?

Sandra Wood headshotApril 19, 2022

Sandra Wood, Executive Director, CKCA

The Federal Government’s budget announced in early April, 2022 has left business community wondering if current Government spending will move the dial on issues impacting industry in this country. Both the CFIB (Canadian Federation of Independent Business) and the CME (Canadian Manufacturers & Exporters) had something to say about it. CFIB’s President, Dan Kelly,  stated that overall the budget was a missed opportunity to help independent business, but CFIB continues to ask Government for more help because business is still  reeling from the pains of Covid. See their full response here.

More recently, CFIB is also asking Government to reconsider the forgivable portion of the CEBA loan, decisions of which have yet to be made although government admitted to continuing the conversation. CFIB, like many other organizations including CKCA,  know that “if you don’t ask, you don’t get” and sometimes those asks have to be made for years before we see any tangible results. CFIB has done an amazing job these past 2 plus years in particular,  lobbying for the interests of business in Canada and Government has listened and acted. Many of us know that CFIB was on the front lines when Covid first hit, telling Government to increase financial aid to business – and they did. In CFIB’s recent business survey it was revealed from those who responded to the survey that only 2 in 5 companies are making normal sales (42%), just over a third reported no pandemic related debt (35%) and less than 1 in 5 indicated they are not holding any pandemic-related stress (18%). Businesses are still challenged with tremendous difficulty keeping up with general costs, such as gas and inputs (90%), and with government costs, such as taxes and fees (82%). A majority are also struggling to find employees, get the products they need, and ultimately make a profit. While the kitchen cabinet industry has been operating throughout the pandemic with work surging, our industry is by no means immune to the impacts and increased costs of doing business.

The CME also responded to the budget and  saw the positives and negatives to the budget. Dennis Darby, CME President said “The budget offers important and helpful measures to stimulate innovation and implement and promote long term economic growth and ease supply chain issues, but it fails to address labour shortages. This is a miss.”

While pleased to see several measures designed to improve Canada’s innovation and investment performance, CME points out that the creation of a Canadian Innovation and Investment Agency which is designed to help businesses make the investments needed to innovate and grow, must have a clear mandate that is agile and aligns with industry needs if the agency is going to deliver on its mandate. Full comments from CME can be found here.

But like so many announcements in the budget, one can’t help but wonder how change will materialize from these initiatives.

Both CFIB and CME acknowledged the tax measures that are good, including the increase of taxable capital limits on the small business tax rate from $15 million to $50 million plus a strategy to establish Employee Ownership Trusts to support employee ownership (could be an important succession option for those looking to exit their business).  There are other initiatives such as the  introduction of  a Labour Mobility Deduction, could also be helpful because it  will allow a tradespersons to deduct up to $4,000/year in eligible travel and temporary relocation expenses starting in 2022 (to encourage the  movement of tradespeople across the country). The Government will examine the rollover provisions for small business investments which allows investors to defer tax on capital gains to ensure the tax system is providing adequate support to growing business.

But as CME noted, the disruptions in supply chain (which is causing losses in the $billions to industry) combined with the many other pressing issues begs the question, will these new budget measures be deployed quickly?

CKCA was talking to a member very recently who has gone through a frustrating Government grant process. The first two times they completed the process, they had success. On a third application following the same processes for the same funds again, the company was forced to spend many valuable hours going through the application process which even included a requirement of getting every employee in their shop to confirm that the employer did not “in any way” help them with completing the employee section of the application. All that time wasted because they were declined funding. It begs the question “Why?”, when on the previous two occasions it worked.

It’s this kind of red tape that creates so much frustration. While Government budget announcements sound good, how much of that money actually makes it to where it’s supposed to go? Another program designed to assist business is the Digital Adoption Program. In speaking with another CKCA member, they have applied for this but are now “stuck in the verification process.” These programs are still worth trying, but as CFIB has pointed out, there is a lot of red tape, so much so that you may want to check out their  “Red Tape Awareness Week“.

The good news is that CFIB was successful in getting  the Federal Minister of Finance, Chrystia Freeland on to a Zoom call on Thursday, April 14 at 3pm. It was good of the Minister to make the time and shows the level of respect that CFIB has carved out with Government.

Minister Freeland openly admitted that she could not “please everyone” and made decisions that in her view were “to pursue a fiscally responsible set of policies.” She added that “I have a lot of confidence in the bank of Canada. It will do its job to get inflation back to target.”  The Minister did point out that “The inflationary pressures we are feeling today are principally global”, citing actions of Putin, Covid readjustments, high prices for agricultural product and supply chain on a global scale.

The Minister further stated that “It’s important to diagnose the problem accurately before discussing solutions.  The Federal Government can and should help with the labour shortage.”  It was good to hear the Minister acknowledge the labour shortage issue, but she went on to remind us that other countries are in worse shape than we are on the labour front. In some ways it felt like we were being told to be thankful for what we have and stop complaining. At CKCA we hear about the impact of the labour shortage almost daily from industry. Regardless of how we fare compared to other nations,  the situation is not getting better, and Government needs to create initiatives that are nimble enough to act quickly and effectively. Because let’s be honest, this isn’t news. The labour shortage trend has been coming a long time. Even the Wood Manufacturing Council noted it in their 2016 report that was done in conjunction with the Conference Board of Canada. Report here. Surely with all the Government funded studies out there, Government has known about this trend for some time?

And therein lies the elephant in the room again. Because now we see the Government allocating $4 billion to an “housing accelerator fund” which goes to municipalities to cut the red tape at the municipal level to speed up housing developments across Canada. It also appears Government is taking measures to remove barriers for temporary foreign workers and immigrants to Canada (although having spoken to other industry organizations, the barriers to entry into Canada are still governed by very dated policies). According to Minister Freeland, Canada has the fastest growing population in the G7. To accommodate the increase in immigration, we need housing. To increase housing, we need more immigration as our workforce. Therein lies the chicken or egg problem.

So more good news is that for the kitchen cabinet industry, there’s no shortage of work anytime soon. In this new normal, it’s not about work shortages, its about labour shortages and supply shortages and increasing costs. The Government is a proponent of competitiveness and funding is available for automation, provided you meet the criteria and have the bandwidth to go through the various applications required. But in the end, it boils down to Government programs that can be navigated more easily, that are cohesive and nimble and that address the pressing issues voiced by organizations such as CFIB, CME and many others. For those of us in manufacturing, we know we are the economic engine of the Canadian economy. Budget 2022 takes some small steps that skim the surface of the complex issues that lie beneath, but it definitely leaves business and especially those in the home building sector, in a pressurized state for the foreseeable future.

Read CBC article here»