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Philip Cross: Weak business investment frustrates Carney's plan

Outside mining, Statistics Canada's annual survey of investment plans doesn't show the private-sector surge the government was hoping for

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A central pillar of Mark Carney’s plan to restructure and revitalize Canada’s lethargic economy is to revive business investment, which has been slumping since 2015. The first chapter of his government’s November 2025 budget trumpeted how “accelerating major nation-building projects” through the new Major Projects Office was going to help bring a much-needed renaissance of business investment in Canada.

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So the government must be disappointed with the results of Statistics Canada’s annual survey of investment intentions. Planned investment growth in Canada has slowed for the third straight year, to 3.7 per cent for this year — and that’s not adjusted for price inflation so in real terms it’s likely to be even less. What’s worse, planned private-sector growth is only 2.8 per cent. The public sector is again carrying the load with a 6.5 per cent hike in capital spending. This has been the pattern in recent years, with public-sector outlays up 28.7 per cent since 2023 versus tepid 5.5 per cent growth in the private sector.

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Not surprisingly, private-sector intentions are most bullish in mining, where record-high prices for metals such as gold and copper are spurring investors on. Mining accounts for fully two-thirds of private-sector spending growth. The strength of demand is reflected in how two of the first five “major projects” Ottawa approved last September were copper mines, while three more mines were included in the second tranche of six projects in November.

Outside mining, private-sector investment is anemic with only four of 14 industries planning higher outlays in 2026. In manufacturing, investment intentions fell for a second straight year. The largest declines were in autos and primary metals (mostly steel and aluminum), largely because of shrinking U.S. demand due to Donald Trump’s tariffs targeting these sectors specifically. Most service industries also plan less investment, notably retailers, telecommunications providers and professional services, such as computer design. Despite the frenzy of speculation about AI, there are few signs it is a significant factor in investment in Canada.

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Public policies for the future of Canada’s manufacturing industry do not reflect the sector’s rapidly shifting reality. For decades, autos and primary metals (notably steel and aluminum) were the biggest investors in Canada, often subsidized by governments. In four of the past eight years, however, and now including 2026, the largest investments have been in the chemicals industry, which almost never figures in public discussions of Canadian manufacturing. Instead, governments lavish subsidies on electric vehicles and battery plants even though their future is very uncertain.

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Outside mining, governments are the only actors willing to invest substantially more in Canada. Besides spending more on their own operations, they continue to pour capital into electric utility and urban transit systems. The explosion of public investment in utilities, up 84 per cent since 2020, reflects a panicky realization that electricity demand is beginning to outstrip supply. Last year, for the first time ever, Canada imported more electricity than it exported. This shortfall partly reflects lower investment in electricity utilities between 2014 and 2020, as governments failed to anticipate that their grandiose plans to shift energy away from fossil fuels would help boost demand for electricity.

As for urban transit, public investment has nearly quadrupled, rising from $5.7 billion in 2016 to $21.0 billion in 2026. Despite such massive investment, the latest data show Canadians continue to shun public transit in favour of driving to work. Ridership fell 2.4 per cent in 2025 and is now 17.8 per cent below what it was, pre-pandemic, in 2019. This despite a gradual shift back to the workplace following the COVID years of working from home.

Restoring investor confidence in Canada is going to require more than a single budget’s soothing words and promises of faster regulatory approval. We need to take a close look at ourselves in the mirror provided by the U.S. In this country, business outlays remain lethargic while governments direct investment into public transit, electricity generation and EV manufacturing, often motivated more by green ideology rather than market forces. In the U.S., in contrast, investment is booming, driven mainly by private-sector innovations in technology. In 2026, the four biggest firms active in artificial intelligence (Meta, Alphabet, Amazon and Microsoft) plan to spend $650 billion on AI-related infrastructure, and they’re doing this despite the policy uncertainty and chaos emanating from the Trump administration. This country hates to take lessons from the United States, but when it comes to business investment the U.S. is clearly doing something right.

Philip Cross is a senior fellow at the Macdonald-Laurier Institute.

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