Ontario's energy costs driving manufacturers out
- December 20, 2016
As Ontario's energy costs continue to rise, more manufacturers are looking outside of the province to invest according to the Coalition of Concerned Manufacturers of Ontario.
Leland Industries is opening a new manufacturing facility in the US because rising energy costs have made Ontario uncompetitive for investment.
The Scarborough, ON, based manufacturer of metal fasteners announced plans for a major expansion in production capacity in Illinois. "This is good news for our company, but bad news for Ontario," Leland founder and CEO Byron Nelson explains. "Leland is a world-class manufacturer of fasteners. Since 1984, we've prided ourselves that a Canadian manufacturer with the right people, processes, and technologies, can compete with anyone in the world. Sales are growing in markets around the world. But, we can no longer compete with the escalating energy costs we are seeing here in Ontario. We have big plans for expansion ahead, but no longer here in Ontario."
Leland is one of many smaller and medium-sized Ontario-based manufacturers that are looking to grow right now and seriously considering investing outside of Ontario. "Ontario's energy costs are rising so quickly many manufacturers are re-assessing whether it makes sense to expand production in this province," says Jocelyn Williams Bamford, vice president of Automatic Coating Ltd. and spokesperson for the Coalition of Concerned Manufacturers in Ontario.
"Industrial electricity bills have soared over the past year, and with Ontario's new cap-and-trade system coming into effect in January, electricity and natural gas costs are likely to jump by at least another 20 per cent. The province will remove HST on electricity in January, but that won't come close to offsetting the energy and transportation cost increases that lie in store for smaller manufacturers across Ontario, many of whom are tied to contracts that prevent them from passing costs along in the form of higher prices to their customers."
Ontario manufacturers have reduced greenhouse gas emissions 15 per cent since 1990, according to a study by Canadian Manufacturers & Exporters. "Manufacturers have become more competitive and have been able to reduce emissions at the same time because they have invested in new technologies," says Bamford. "Higher energy costs leave us less money for investment. And, if manufacturers can't invest in Ontario, it's not good for the economy or for jobs in this province. Ultimately, it's not good for the environment either."
The Coalition has called on the Ontario Government to make all cost increases resulting from its cap-and-trade program visible both to consumers and to industry. It also recommends that in its forthcoming budget the Government introduce a tax credit that would offset the impact of higher energy costs and encourage manufacturers to invest in new technologies.
"We can't emphasize the urgency of the situation enough," says Bamford. "Companies like Leland are making investment decisions now. Ontario stands to lose good, high-paying jobs if something is not done in the next budget to mitigate the negative impacts that cap-and-trade will have on smaller manufacturers across the province."
Leland Industries employs over 200 people in its current manufacturing facilities in Scarborough, Ontario and Waterloo. The Coalition of Concerned Manufacturers in Ontario speaks on behalf of a growing number of small and mid-sized manufacturers across the province that are concerned about the impact that rising energy costs will have on their business and on the Ontario economy.