For all the efforts the province and city are making to attract and retain business, on one key front we’re going down fast.
Metro Vancouver is losing head office jobs at an alarming rate, faster than any other major city in Canada. According to a study conducted by PricewaterhouseCoopers LLP (PWC), the number of head offices in Vancouver dropped by 19% from 2001-09. Head office jobs fell even further, by 28%, compared with increases in Calgary (7%) and Toronto (3%).
“Canada, and in particular B.C., has been losing an economic battle to retain the head offices of Canadian companies and to attract multinational or foreign head offices or head office functions,” said Brad Sakich, PWC tax partner in charge of the B.C. region. “This is often a result of international mergers and acquisitions that leads to the consolidation or migration of the Canadian head office or its functions to outside of Canada.”
Sakich offers several reasons: few regulatory barriers to takeovers, a weak Canadian dollar during that period and easier and cheaper access to capital for acquisitions by U.S. companies with higher price/earnings ratios.
A new trend is Chinese companies doing “creeping takeovers” through joint ventures with Canadian companies, especially in the energy sector.
OK, but why is B.C. taking such a hit compared with other provinces?
Sakich noted that the companies that have left B.C. are mainly forestry and tech-related, where there are no regulatory restrictions compared with the banks, telecoms and airlines that dominate Toronto and are protected by Canadian ownership laws.
And then there’s our “go-for-the-golf” corporate culture, where the entrepreneurial end game is selling to a world dominator, not becoming one.
“It appears that B.C. is unable to nurture a business to a stage where it requires a fully integrated head office function,” said Sakich.
The importance of head office jobs – compared with, say, the ESL schools that are the biggest tenants of our downtown commercial buildings – is that they are high paying, they attract other head offices and they contribute a disproportionate share of funding for charitable and cultural causes.
When the Celebration of Light or the Vancouver Symphony or the St. Paul’s Hospital Foundation go looking for a signature sponsor, they start with the A-list: major B.C.-based head-office corporations.
Their value was recently underlined by Saskatchewan Premier Brad Wall’s decision to impede, if not block, the sale of PotashCorp to BHP.
Even though every takeover results in an earnest followup announcement that this will not affect local jobs, that’s never the case. The really attractive jobs, the ones that keep the brightest university grads here, that make other head offices want to be here, invariably disappear.
“The loss of these jobs,” said Sakich, “has a dramatic effect on the character of your city.”
Next week I’ll look at what we can do to stop these losses.