Economic Profile
Physical Characteristics | Government | Business Climate | Demographics | Economic Structure | Economic Performance | Cost Comparisons
Vancouver has a dynamic, highly diversified urban economy with growing knowledge-based sectors and strong global linkages.
Physical Characteristics
Greater Vancouver, with a population of 2.3 million, is Canada’s third largest urban area. Located in British Columbia, Canada’s westernmost province, the region covers nearly 2,900 square kilometres, bordered by the Pacific Ocean to the west, the US border to the south, the valley of the Fraser River to the east and the Coastal Mountains to the north. Seattle, Washington is 226 km to the south, while Calgary, Alberta is 975 km to the east. Vancouver’s oceanside location gives it a mild climate year round.
Vancouver is consistently ranked as the world’s most livable city by the Economist Intelligence Unit and Mercer. .
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Government
Canada is a federal state; the governments of Canada and British Columbia both play a role in establishing Vancouver’s business climate.
The Vancouver region, comprising the City of Vancouver and 21 other municipalities, accounts for close to half of British Columbia’s population and economic output. A region-wide authority, Metro Vancouver, has responsibility for water supply, sewage treatment, garbage disposal and recycling, and other activities. Economic development activities in the region are coordinated by an alliance of municipal economic development agencies known as Metro Vancouver Commerce.
The City of Vancouver is the largest municipality in the region in terms of population and economic activity. The city’s economic development agency, the Vancouver Economic Commission (VEC), is a founding member of Metro Vancouver Commerce, and participates in all Metro Vancouver Commerce activities. The city’s downtown includes more than half of all commercial office space in the region and serves as the international front door to British Columbia.
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Business Climate
Canada
Canada is enjoying solid economic performance and a highly favourable business climate. Canada’s 2008 Budget noted:
- Canada’s labour market is strong, with unemployment near a 33 year low and the share of Canadians currently employed at a record high.
- Household net worth is growing strongly and corporate profits are near a record high.
- The fiscal position of the consolidated government sector is excellent; the most recent OECD estimates suggest Canada will have the best fiscal position of all G7 nations in 2008.
- Canada’s real income per capita has grown over 20 per cent since 2001.
- The federal corporate tax rate has been reduced from 37.8 per cent in 1980 to 15 per cent by 2012. Canada will have the lowest tax rate on new business investment in the G7 by 2011, and will have the lowest statutory tax rate in the G7 by 2012.
- The federal debt-to-GDP burden will fall to 25 per cent by 2011/12, the lowest since the 1970s.
The 2008 KPMG Competitive Alternatives study found Canada has the lowest business costs in the G7. It leads the G7 in manufacturing, software and R&D costs.
KPMG ranked Canada first in the G7 for high school science scores, and second in educational attainment and expenditure. Canada ranked first in the G7 for environmental laws and second for environmental performance. Canada leads the G7 in energy self-sufficiency.
British Columbia
British Columbia’s economy is currently outperforming that of Canada, and its business climate is among the most favourable of all Canadian provinces.
As noted in its 2008 Budget, the Government of British Columbia has taken major steps to create a stable and competitive tax environment in the province.
The general corporate income tax rate has been reduced from 16.5 per cent in 2000 to 10 per cent in 2011. Together with federal tax reductions, this will result in a combined federal and provincial tax rate of 25 per cent by 2012 – well below the average US rate of 35 per cent. The small business tax rate has been reduced to 3.5 per cent with planned further reductions to 2.5 per cent by 2011.
The threshold for the small business tax rate has been increased to $400,000. Business tax burdens in British Columbia are among the lowest anywhere in North America.
A number of major personal income tax reductions have also been enacted, cutting income tax rates by a third, with the result that British Columbia has the lowest income tax rates in Canada for incomes up to $111,000. Top marginal personal income tax rates remain below those in jurisdictions such as California and Ontario.
Other recent tax reductions include the elimination of the corporate capital tax – on large financial institutions by 2010.
The B.C. government has a strong record of sound fiscal management. A balanced budget is required by law and the Province will end the 2007/8 fiscal year with its fourth consecutive budgetary surplus. Its ratio of tax supported debt to GDP has fallen from 21.3 per cent in 2002/3 to an estimated 14.1 per cent in 2007/8 and is expected to remain below 14 per cent in future years. The B.C. government enjoys the highest ratings on its debt from both Moody’s and Standard & Poor’s.
The B.C. government is a North American leader in the use of public-private partnerships (PPPs) to deliver public-use infrastructure. PPP transfer project risk from government to the private sector through fixed price agreements, guaranteed delivery dates and performance guarantees. About $4.7 billion in PPP projects are completed or under construction, while an additional $2.7 billion in projects is at the competitive selection stage. More than 20 PPP projects have been, or are scheduled to be, delivered on time and on budget.
British Columbia has an on-going program aimed at modernizing the regulatory system to promote innovation and economic opportunity, while protecting the public interest. Since the program began in 2001, regulatory burdens have been reduced by over 40 per cent.
British Columbia has been long recognized as a North American leader in advancing environmental sustainability. The B.C. government recognizes that an attractive business climate addresses long-term sustainability issues, such as climate change, as well as short term returns on investment. Its 2008 Budget introduced one of the most progressive climate action plans in the world, aimed at reducing GHG emissions to 33 per cent below 2007 levels by 2020. A key element of the plan is a revenue neutral carbon tax, set at $10 per tonne of emissions in 2008, rising to $30 per tonne by 2012. Taxes raised on carbon will be offset by tax reductions, so the net impact on business and individual taxpayers
will be zero.
The carbon tax is part of a much broader set of climate change initiatives, including incentives and tax reductions for energy efficiency upgrades; increased funding for research and energy-related technologies; a “cap and trade” system for large emitters; major transit system expansions; and new demand power management systems.
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The regional population has been growing about 1.3 per cent annually in recent years; increases are expected to continue over the next decade, with the population reaching 3 million by 2030. While some suburban municipalities are growing more rapidly, the city of Vancouver continues to see healthy population growth.
With the natural rate of population growth steadily declining, population growth is driven primarily by immigration. Canadian and B.C. government policies encourage immigration of people with business and employment-related skills. Immigrants account for 40 per cent of the region’s population. This high proportion of foreign born individuals provides Vancouver with a talented and diverse labour pool, with strong international connections.
Immigrants to Canada are well educated: among those immigrating between 2001 and 2006, half had a university degree. Among working age individuals, immigrants account for half of all doctorate degrees and over 40 per cent of master’s degrees. Immigrants are also, overall, younger than native born Canadians.
According to the OECD, Canada has the highest proportion of people aged 25-64 with a college or university certificate among all OECD countries.
Greater Vancouver’s population is better educated than the Canadian average. According to the 2006 Census, 31 per cent of the working age population has a university degree (Canadian average: 23 per cent) and fully 57 per cent has a university or college education (Canadian average: 48 per cent).
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Economic Structure
Over the past quarter century, Vancouver’s economy has experienced rapid structural change. Vancouver’s defining economic role has evolved from a service centre for the province’s resource economy to a dynamic urban centre with strong, multi-faceted international connections that have strengthened dramatically with the rise of the economies of Asia Pacific. The economy is now highly diversified thanks to strengths in many new areas including significant clusters in knowledge-based sectors.
As in all metropolitan areas, sectors providing services to the local population account for the greatest proportion of jobs. Retail trade, for example, employs nearly 11 per cent of the regional workforce, while healthcare and social services accounts for 9.3 per cent. An on-going construction boom has raised this sector’s share of jobs from 5.1 per cent in 2001 to 6.4 per cent in 2006.
Among export-oriented sectors:
- The relatively small and diversified manufacturing sector employs 98,000 people, or 8.5 per cent of the workforce. Although this is a smaller share than many other large cities, manufacturing is an important part of the economic landscape. Many of the jobs are in management and administration rather than in production.
- The strong tourism sector is reflected in 8 per cent of all jobs being in accommodation and food services – a higher proportion than in other Canadian cities.
- The professional, scientific and technical services sector employs 76,000 people, reflecting the region’s strong orientation to export of knowledge, particularly related to resource industries, engineering and sustainability.
- The arts, entertainment and recreation industry, as well as the film/TV/sound industry are far more prominent than in other Canadian cities.
- The financial services sector is a larger part of the economy than in all other Canadian cities except Toronto.
Vancouver’s global gateway role is evident in the comparatively high proportion (5.7 per cent) of people working in the transportation industry.
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Vancouver and British Columbia are enjoying one of the strongest economic expansions on record. Over the past five years, the provincial economy has consistently outpaced the Canadian economy.
Looking ahead, the province, propelled in large part by strength in the Greater Vancouver region, is positioned to continue to outperform the national benchmark. There is widespread agreement among economists and other forecasters that British Columbia will remain at or near the top of the provincial growth rankings in the coming years. Among other factors, a competitive business and tax climate, Asia Pacific and the growing gateway role, the successful hosting of the Vancouver 2010 Olympic and Paralympic Winter Games, high rates of immigration, high levels of investment and construction, a diverse and skilled workforce and a growing advanced technology sector all contribute to the positive outlook.
According to the 2006 Census, employment in Greater Vancouver reached 1.1 million in 2006, a gain of 11 per cent from 2001. This is stronger than the gain recorded over the previous 5-year period and is the fastest pace of job growth among Canada’s three largest metropolitan areas.
Vancouver’s unemployment rate is currently at record lows. At just 4 per cent it is slightly below the province-wide rate and well below the national unemployment rate.
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Cost Comparisons
In 2010, KPMG rated Vancouver as having the Best Business Tax Environment in the world. In 2011, Vancouver was rated as number 1 in MMK's Cost Comparison Analysis.
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