Economy and Finance

Canadian economy at risk as retiring business owners transfer assets: CIBC

Thu Nov 15, 2012 10:45am PST

The next several years can see trillions of dollars in business assets changing hands, which could pose a serious risk to the Canadian economy, according to a CIBC World Markets report issued this week.

The report found that 310,000 business owners – which amounts to nearly 30% of all the small and medium-sized businesses in Canada, worth an estimated $1.9 trillion in business assets – will be selling or transferring control of their companies within the next five years. By 2022, those numbers are expected to reach 550,000 owners with $3.7 trillion in assets.

"The economic implications of the accelerated pace at which firms are changing hands should not be underestimated," said Benjamin Tal, CIBC deputy chief economist. "The firms that will change ownership in the coming five years currently employ close to two million people and account for no less than 15% of GDP."

Tan said faulty or badly executed succession plans could have a "ripple effect" through the Canadian economy, due to reduced productivity, job losses, premature sales and increased bankruptcy rates.

The report found that almost 60% of business owners that are within 10 years of retiring age have not addressed their succession plans with their families or business partners.

"The demographic realities of Canada in general, and the small and medium-sized enterprises in particular, suggest that succession planning is increasingly becoming a critical issue."

ecrawford@biv.com

@EmmaCrawfordBIV

Tags: retirement, Benjamin Tal, Canadian Imperial Bank of Commerce, productivity



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