30 03 2017

2017 Federal Budget Highlights Innovation in Six Major Sectors and Brings Employment, Training and Entrepreneurship to the Forefront

On Wednesday, March 22, Canadian Finance Minister Bill Morneau tabled the 2017 federal budget. This budget focuses on creating jobs and strengthening the workforce, with the goal of fostering business growth through innovation in advanced manufacturing, agri-food, clean technology, digital industries, health/bio-sciences and clean resources, ultimately improving Canada’s position on a global scale.

2017-2018 budget highlights pertaining to Ayming’s clients

Innovation 

  • Nearly $3 billion has been dedicated to supporting innovation over the next five years, in addition to the $3 billion per year delivered through the SR&ED program.
  • The Government will initiate a horizontal review of all federal innovation and clean technology programs across all departments, as federal innovation programs are dispersed. Consistent with the principles of Canada’s new Innovation and Skills Plan, the horizontal review will look to simplify programs and better align resources to improve the effectiveness of innovation programs.
  • To deliver the greatest benefits for Canadians, the Plan will target six key areas—advanced manufacturing, agri-food, clean technology, digital industries, health/bio-sciences and clean resources (extraction, harvesting and use of natural resources)—with a focus on expanding growth and creating jobs.
  • Budget 2017 proposes to invest up to $950 million over five years, starting in 2017–18, to be provided on a competitive basis in support of these business-led innovation “superclusters” (concentrated geographic areas that anchor tech companies, based on the models from Silicon Valley or the Toronto-Waterloo region) that have the greatest potential to accelerate economic growth. 

  

The Plan will set clear and ambitious targets to: 

  1. Grow Canada’s goods and services exports—from resources, advanced manufacturing and others—by 30 per cent by 2025.
  2. Increase the clean technology sector’s contribution to Canada’s gross domestic product (GDP).
  3. Double the number of high-growth companies in Canada, particularly in the digital, clean technology and health technology sectors, from 14,000 to 28,000 by 2025.
  4. Expand the level of support for job training under the Labour Market Transfer Agreements, which aims to increase labour market participation of groups that are under-represented in Canada's labour force and to enhance the employability and skills of the labour force. 

This will be accomplished by: 

  1. Accelerating a small number of business-led innovation “superclusters” that focus on innovative industries.
  2. Increasing the number of collaborations between industry, post-secondary institutions and research institutions.
  3. Reinforcing world class research strengths at post-secondary institutions in areas such as quantum computing, stem cells and artificial intelligence.
  4. Assisting Canadian innovators in finding a first customer to test and validate their technologies through the federal government. 
  • Budget 2017 proposes to provide $8.1 million over five years, starting in 2017–18, to oversee the implementation of the Impact Canada Fund., a new initiative that will focus its initial efforts on two problem-solving streams: 1) a clean technology stream, supported by up to $75 million over two years, starting in 2017–18, to address challenges such as helping Canada’s rural and remote communities reduce their reliance on diesel as a power source. 2) a smart cities stream, supported by $300 million over 11 years. •
  • Budget 2017 proposes to provide up to $50 million, starting in 2017–18, to launch a new procurement program, Innovative Solutions Canada. Under Innovative Solutions Canada, a portion of funding from federal departments and agencies will be allocated towards early-stage research and development, late-stage prototypes and other goods and services from Canadian innovators and entrepreneurs. This program will be designed in a way that other provincial and municipal governing bodies can take part in the future. To encourage inclusive growth, effort will also be made to encourage procurement from companies led by women and other underrepresented groups. Further details about initial participation and spending targets will follow in the coming months.
  • Budget 2017 proposes to create a new $1.26 billion five-year Strategic Innovation Fund to consolidate and simplify existing business innovation programming, in particular, the Strategic Aerospace and Defence Initiative, Technology Demonstration Program, Automotive Innovation Fund and Automotive Supplier Innovation Program. 

Employment & Training

To further expand employment opportunities for young Canadians, Budget 2017 proposes to provide an additional $395.5 million over three years, starting in 2017–18, for the Youth Employment Strategy. Combined with Budget 2016 measures, these investments will help more than 33,000 vulnerable youth develop the skills they need to find work or go back to school; create 15,000 new green jobs for young Canadians; and provide over 1,600 new employment opportunities for youth in the heritage sector by: 

  1. Making training opportunities more accessible to working Canadians.
  2. Increasing the number of Canadians participating in work-integrated learning
  3. Increasing business investments in training.
  4. Improving access to global talent through accelerated processing times.
  5. Growing the number of Canadians equipped with science, technology, engineering and mathematics (STEM), coding and digital skills, especially among underrepresented groups. 
  • $5.2 billion is also being allocated for skills development as the government plans to help Canadians adapt their education and employment training to a diversifying economy at a time when the lower price of oil has meant the natural resource sector can no longer be counted on to provide jobs — or sustain federal revenues.

Entrepreneurship

  • $400 million over three years will be distributed through the Business Development Bank of Canada for a "venture capital catalyst initiative" to make more venture capital available to Canadian entrepreneurs.

Clean Technology

  • Budget 2017 proposes to increase financing support for Canada’s clean technology sector by making available more equity finance, working capital and project financing to promising clean technology firms. Nearly $1.4 billion in new financing, on a cash basis, will be made available to help Canada’s clean technology firms grow and expand.

Artificial Intelligence 

  • To retain and attract top academic talent, and to increase the number of postgraduate trainees and researchers studying artificial intelligence and deep learning, Budget 2017 proposes to provide $125 million to launch a PanCanadian Artificial Intelligence Strategy for research and talent.
  • The Strategy will promote collaboration between Canada’s main centres of expertise in Montréal, Toronto-Waterloo and Edmonton and position Canada as a world leading destination for companies seeking to invest in artificial intelligence and innovation.
  • Expanding the pipeline of Canadian talent for artificial intelligence will benefit businesses that wish to develop and submit a proposal for an artificial intelligence supercluster. A leader in the area of artificial intelligence, the Canadian Institute for Advanced Research (CIFAR) will be responsible for administering the funding for the new Strategy. 

Agri-Food Sector

The Innovation and Skills Plan has set an ambitious target to grow Canada’s agri-food exports to at least $75 billion annually by 2025. In recent years, industry growth has been strong, with farm revenues, annual exports and farm incomes all reaching record highs. Despite this strong performance, there is still room for further growth—growth that can be achieved through innovation and the development of value-added products. In addition to specific investments made to support the growth of and innovation in Canada’s agri-food sector, the Government has undertaken efforts to support Canada’s farmers and food processors, including: 

  • Launching a full review of rail service across western Canada.
  • Creating a $10.1 billion Trade and Transportation Corridors Initiative that will invest in gateways and ports, to help get agri-food products to market.
  • Successfully completing the Comprehensive Economic and Trade Agreement with the European Union, and making ongoing efforts to expand market access for Canadian agri-food producers throughout Asia.
  • Eliminating tariffs on a broad range of agri-food processing ingredients, covering approximately $700 million in annual imports, to strengthen the competitiveness of Canadian agri-food manufacturers at home and abroad.
  • Improving access to support for agri-food value-added processors through the new Strategic Innovation Fund.
  • Investing $500 million to support the expansion of broadband networks in rural Canada and $2 billion to support rural infrastructure including roads and bridges, making it easier for Canada’s agri-food producers to connect to markets in Canada and internationally.

 

In addition, as part of the $200 million provided for the Clean Growth in the Natural Resources program, Budget 2017 proposes to provide funding to Agriculture and Agri-Food Canada to support the expanded adoption of clean technology by Canadian agricultural producers.

Ayming’s Perspective

No changes were announced to the Scientific Research & Experimental Development (SR&ED) tax program, the largest R&D program aimed at the private sector. It is delivered through the tax system and thus there is no predetermined budget for the SR&ED program. All companies based in Canada that invest in R&D can qualify, irrespective of their size, industry sector or technology area they represent – as long as they perform qualified R&D. The SR&ED program will remain steady and provide up to 74% of eligible expenditures in Investment Tax Credits (ITC) to Canadian corporations.

On a positive trend, many of the items proposed in the 2017 budget do directly affect the industries and types of companies we work with. As the government aims to accelerate growth for key industrial clusters such as advanced manufacturing (Industry 4.0), agri-food, clean technology, digital industries, health/bio-sciences and clean resources, as well as for the development of rural communities, new funding opportunities will become available. Since the impact of some measures announced in the budget remains unknown (for example, whether Innovative Solutions Canada will supplement or compliment the BCIP program), it is critical to remain informed of changes to current funding programs, as well as the creation of new ones.

Most government funding programs are managed on a first come, first served basis, and many programs distribute the bulk of their funds early in the intake period. Heavy concentration on certain sectors will likely increase the competition for funding, so it is important to include government funding in your overall strategy to benefit as much as possible from government programs.

Ayming will continue to track changes to the funding landscape, keeping you informed of new funding opportunities in your sector. If you have any questions, or are engaging in business development, capital expansion, human resources & training, or R&D projects, please contact us for more information on available government funding related to your projects and industry.