What’s in the 2021 federal budget for manufacturers?

While the new federal budget tabled Monday contains numerous supports for manufacturing, it falls short of what could truly help grow the sector, says the Canadian Manufacturers & Exporters association.

“The lack of a comprehensive manufacturing strategy as recommended by the government’s own Industry Strategy Council in [Monday’s] budget is placing our sector in a difficult situation. This is not the plan that will launch our industry forward or see us win the global race,” says Dennis Darby, president and CEO of CME, in a statement.

The association applauded several measures outlined in the Liberals’ proposed budget, including the extension of the wage subsidy, investments in the Strategic Innovation Fund and Net Zero Accelerator, and funding allocated to child care and skills training.

But “the federal government missed an opportunity to have a more comprehensive approach which would have helped to make our manufacturers more competitive,” says Darby. “A lot of the measures announced today are positive and will help, but there is not enough in there to move the needle and drive long-term growth.”

The budget targets, among other things, the recovery from COVID-19, jobs and growth and net-zero initiatives. Notably, there is a move to introduce legislation to move the federal minimum wage to $15 per hour, and $30 billion in child care supports, which will help Canada better tap into its available workforce, the government says.

The budget also includes $2.2 billion over seven years to build out the life sciences sector – while that money is mostly for research, it does include $92 million over four years for adMare, a catalyst for bioinnovation, to help companies scale up in the sector.

As debate from opposition parties is already underway in the House of Commons, let’s take a look at some of the supports in the budget that would be available to the manufacturing sector.

Wage subsidy extension

The feds plan to extend the period for the Canada Emergency Wage Subsidy (CEWS) – created to help companies offset the cost of employing workers while revenue is in decline during COVID-19 – to the cost of $10.1 billion. Currently, CEWS is set to expire in June 2021. The budget proposes the period run through September 25, 2021, with the subsidy rate gradually decreasing as of July 4.

The government also proposes CEWS be extended through November 20, 2021 should public health situations not improve at the pace expected. The total cost of the program so far has been $73 billion.

Also of note is that the requirements for CEWS may change – any publicly listed corporation using the wage subsidy will need to repay the amounts if they are found to be paying their top executives more in 2021 than 2019. The government says this measure will help to ensure the CEWS is being used to serve workers.

A boost for the Strategic Innovation Fund

The Strategic Innovation Fund would see $7.2 billion over the next seven years, and $511.4 million ongoing. Of that funding, $2.2 billion would go to the automotive, aerospace, life sciences, and agriculture sectors. The remaining $5 billion would be allocated to the fund’s Net Zero Accelerator to scale up clean-tech projects that help to reduce emissions by 2030. This is in addition to the $3 billion over five years that was allocated to the Net Zero Accelerator at the end of 2020, bringing a total of $8 billion to the project.

The Strategic Innovation Fund would draw on this additional funding to provide $1.75 billion for the aerospace sector (outside of an additional $250 million for an Aerospace Regional Recovery program that would help the sector bounce back from COVID-19 with supports to help SMEs with commercialization and productivity improvements), and to provide $1 billion for restoring the life sciences and bio-manufacturing sector (included in the $2.2 billion mentioned above).

Tax break for manufacturers of zero-emissions tech

In addition to the money allocated to the Net Zero Accelerator, the federal budget aims to grow the clean technology manufacturing sector by reducing general corporate and small business income tax rates for manufacturers of zero-emissions technology such as wind turbines, geothermal energy systems, electric vehicles, batteries for electric vehicles, and others, by 50 per cent as of Jan. 1, 2022 for a period of 10 years.

Technology adoption for small manufacturers

A stream of the new Canadian Digital Adoption Program, which will help SMEs adopt digital technologies, would be reserved for small manufacturers and food processors to access advisors for tech planning and financing.

The program would see a total of $1.4 billion allocated over four years for skills, training and advisory services for all eligible businesses. An additional $2.6 billion would go to the Business Development Bank of Canada to assist SMEs as they adopt new technology.

Incentives for capital projects

Under the 2021 budget, companies would be able to immediately expense up to $1.5 million after Apr. 19, 2021 for eligible capital investments in new technologies, including digital assets and intellectual property.

First-year apprenticeships

The feds propose $470 million over three years for a new Apprenticeship Service, which would assist 55,000 first-year apprentices in manufacturing and construction Red Seal trades in pursuing opportunities at SMEs.

Employers would be able to receive up to $5,000 for first-year apprenticeships to help pay for training and salaries – but if they hire apprentices from underrepresented groups, that grant jumps to $10,000.

Hiring and new job opportunities

The budget proposes a new $595-million Canada Recovery Hiring Program, which would be open between June 6 and November 20, 2021 for companies that are still experiencing qualifying declines in revenue because of the pandemic. They could use the funds to pay higher wages or to increase the amount of hours worked – but they’d only be able to claim this grant or the Canada Emergency Wage Subsidy, not both.

Also in the budget is $708 million over five years for approximately 85,000 work-integrated learning placements via Mitacs, a non-profit that helps youth with scientific and technical knowledge find opportunities in industry to enhance innovation.

Innovation, Science and Economic Development Canada would also facilitate $250 million over three years to scale proven industry-led ways to upskill about 15,000 workers and move them into new jobs.

Skills training

The 2021 budget proposes $960 million over three years for a Sectoral Workforce Solutions program, which would design and deploy training through sector associations for up to 90,000 Canadians. Criteria for the program would ensure that 40 per cent of the workers are from underrepresented groups, including women, Indigenous people and persons with disabilities. The program would be targeted especially toward small and medium-sized businesses.

It also includes $55 million over three years for a Community Workforce Development program targeted at skills training for approximately 25,000 workers – with 75 per cent reserved for projects supporting underrepresented groups – in high-potential growth organizations in sectors such as energy.

Another $298 million is earmarked for up to 90,000 Canadians, especially those in marginalized groups, to further develop their foundational and transferable skills, including literacy, numeracy and soft skills in a new Skills for Success program.

Working adults looking to upgrade their skills will be eligible to extend the existing $1,600 government top-up for continuing education for another two years.

R&D access

The feds propose $5.7 million over two years to connect businesses with the National Research Council’s Industrial Research Assistance Program (IRAP)’s Interactive Visits initiative, which allows companies to use and access equipment, facilities and expertise at Technology Access Centres that are connected to Canada’s college system. Businesses owned by individuals in underrepresented groups will have more access.

The budget also includes a proposed total of $500 million over five years to expand IRAP to help 2,500 additional SMEs.

Financing for small businesses

Proposed amendments to the existing Canada Small Business Financing Act would allow for $560 million in annual financing funding.

Among the changes are increasing maximum loan amounts from $350,000 to $500,000 and upping the loan coverage period from 10 to 15 years for equipment and leasehold improvements, as well as changing the eligibility for loans to include intellectual property and start-up assets.

Investments in artificial intelligence

The feds propose $443.8 million over the next 10 years to support the Pan-Canadian Artificial Intelligence Strategy. Among the highlights are $185 million over five years to further commercialization of AI innovations, and $8.6 million over five years to further development of AI-related standards.

Access the 2021 federal budget here.