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Canadian Manufacturers & Exporters (CME) welcomes initiatives announced with the federal budget  to stimulate innovation and investment. However, it says the federal government fell short on addressing the pressing labour shortage for manufacturing.

“The manufacturing sector faces two major challenges today that are hindering its ability to produce and sell products: supply chain disruptions and labour shortages,” said Dennis Darby, President and CEO of CME. “Today’s 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.”

The budget was presented on April 7 by Deputy Prime Minister and Minister of Finance, Chrystia Freeland.

CME welcomed the changes to the Temporary Foreign Worker Program announced earlier this week, but more solutions were expected in today’s budget and Darby said the government did not offer any substantial measures to address ongoing and acute labour shortages in manufacturing, even though the sector is currently facing a record-high 81,000 job vacancies. While the budget recalls investments made to support the processing of immigration applications, processing times remain too long, Darby argued.

Darby said CME was pleased to see several measures designed to improve Canada’s innovation and investment performance, including the creation of a Canadian Innovation and Investment Agency designed to help businesses make the investments needed to innovate and grow. However, its mandate will need to be “clear, agile and align with industry needs” if the agency is to deliver on its mandate of improving investment growth in manufacturing, he added.

“Overall, Canada lags well behind other OECD countries in non-residential business investment, and this is leading to a deterioration in our international competitiveness. To ensure Canada’s future prosperity, we need to reverse these trends. But to do this, Canada needs to have the right levers in place to stimulate investment, “said Darby.

The government’s plan to cut taxes on small businesses is another positive move, according to Darby. It will ease the current phase-out rules related to the small business tax rate, with access to the lower rate fully phased out when taxable capital reaches $50 million, rather than at $15 million.

Also noteworthy is the establishment of a Canada Growth Fund aimed at attracting private sector investment in new and traditional sectors, including manufacturing, as well as to support the restructuring of critical supply chains, Darby said.

A 30 per cent tax credit for investments in clean technology and a refundable tax credit for Carbon Capture, Utilization, and Storage (CCUS) will support manufacturers as they work to decarbonize their industrial processes, Darby but added that care must be taken to provide businesses with the necessary technical support.

Darby said CME is also pleased to see a commitment by the federal government to undertake a review of the Scientific Research and Experimental Development (SR&ED) program as well as to consider the suitability of adopting a patent box regime, two initiatives long championed by CME. Given that manufacturing accounts for a large share of Canada’s R&D expenditures, it is vital that industry is adequately consulted on any proposed changes to the SRE&ED program and on the potential development of a patent box.

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