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From the Editor: September 2014

Building Stability –


September 29, 2014
By Andrew Macklin


Topics

The past few months have been filled with announcements from provincial
governments across Canada, providing information about new road
construction pro- jects being supported with monies from the Building
Canada fund.

The past few months have been filled with announcements from provincial governments across Canada, providing information about new road construction pro- jects being supported with monies from the Building Canada fund.

This is year one of the new Building Canada Plan, announced by the federal government in February.  The 10-year commitment includes a $32-billion Community Improvement Fund, a $14-billion Building Canada Fund, and $1.25 billion for P3 projects. The government also committed an extra $6 billion in funding for existing infrastructure programs.

The program represents the most comprehensive commitment to infrastructure spending in Canadian history. However, it is vulnerable because a change in the political stripe of the party at the helm of the government could also bring an end to the program. At the same token, it is foreseeable that a new government could provide additional funding for infrastructure; however, that is not as likely, as Conservative governments have traditionally provided the most funding support for infrastructure at the federal level.

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The federal government dollars show its support for new and renewed infrastructure, and several provinces are also showing a strong commitment: Ontario and western Canada are riddled with ongoing new and rehabilitation road/bridge construction projects, Quebec has several billion-dollar projects at various phases, and parts of Atlantic Canada are gaining momentum. New Brunswick has been a source of concern, but the results of the provincial election could change that.

The commitments on both the provincial and federal levels should also help to bolster aggregate production across the country, especially where close-to-home aggregate are a concern. Major centres across Canada continue to see the bulk of the new infrastructure construction, providing pits and quarries in those regions with ample business.

This should be a near perfect storm for the aggregates and roadbuilding industry in Canada. But it isn’t. And there is a very simple reason for that: the increased cost of doing business.

Even in such a solid economic climate for this industry, financial pressures are everywhere. The cost of labour continues to rise at a higher rate than many corporate bottom-lines, shrinking specs are causing a growing need for significant investments in new technologies, logistics are more expensive as fuel costs increase, and rates for a multitude of necessary insurance policies are climbing.

None of those investments are avoidable, so all must be managed. But they can’t just be done based on today’s numbers, knowing full well that tightening political budgets and regular elections can dramatically change the scope of infrastructure investment.

But today, even with all of the costs facing your business, there is reason to believe that expenses can be managed on the back of positive business growth. Opportunities for new business are emerging as governments announce their infrastructure renewal plans in and around urban centres and future development plans in the northern parts of several provinces are providing optimism for continued growth beyond the current Building Canada Fund’s mandate.

Hopefully our politicians can continue to find money in the budget to stabilize or increase infrastructure spending so that we can avoid the crisis happening south of the border and continue to build a prosperous business for years to come.