The Halifax Shipyard was recently awarded one of the lucrative federal shipbuilding contracts.Andrew Vaughan
A few months ago I had the opportunity to write a report on the potential economic impact on the Nova Scotia economy if the Halifax Shipyard was chosen as the site for the fabrication of the Canadian Navy's combat vessels. The report was based on an economic impact analysis prepared by the Conference Board of Canada.
Using Statistics Canada data and its own internal economic modelling, the Conference Board estimated an average of over 8,000 jobs per year would be sustained in Nova Scotia from 2012 to 2030 as a result of direct, indirect and induced economic effects. Annual gross domestic product (GDP) (in constant 2002 dollars) generated from this project would amount to an average of $661-million a year.
The report looked at the sectors of the local economy that would stand to benefit the most from the new spending. Assuming household spending would be similar to current trends in Nova Scotia, the project would generate more than $50-million in new food sales -- more than $11-million alone in restaurants. An estimated 750 new vehicles would be sold each year. Some $8.5-million would be spent on telephone services and another $4.3-million on cable and satellite TV services.
I also estimated the induced employment impacts from the project. This combat vessels fabrication project would support enough market demand for 35 new lawyers, 30 insurance brokers and agents, nearly 20 pharmacists and 10 new dentists.
The Conference Board also estimated how the shipbuilding project in Nova Scotia would impact the rest of the Canadian economy. Not surprisingly, given its concentration of suppliers, head offices and the financial services industry, Ontario is the main beneficiary. For every $1-million worth of shipbuilding in Nova Scotia, Ontario's real GDP increases by $195,000. Ontario wasn't really 'shut out' of the shipbuilding project after all.
For every $1-million worth of shipbuilding in Nova Scotia, other provinces see a combined GDP increase of $491,000. The other province impacts would have been much lower had the project been awarded to suppliers in either Quebec or Ontario.
There are those who say the Canadian government should have purchased its vessels from a yard in South Korea. They argue it is inefficient to have a Canadian firm do the work when undoubtedly there are Korean firms who could build the ships at a lower cost and in a quicker timeframe.
When a government goes offshore to make a large scale purchase, it has to weigh the economic consequences of its decision. Even if it were cheaper to build abroad, as shown above Canada would lose thousands of good paying jobs each year and hundreds of millions in tax revenues generated from the economic activity that is the result of in-country shipbuilding.
In current dollars, the Conference Board of Canada's economic impact analysis estimated that between 2012 and 2030 there would be a combined $5.3-billion worth of personal income taxes, corporate income taxes and indirect taxes generated from the combat vessels fabrication project.
If the vessels were purchased abroad, the employment and positive taxation effects in Canada would be marginal.
The combat vessels fabrication project will be the anchor that fosters a renewed shipbuilding industry in Nova Scotia.
The prospects for Halifax and Nova Scotia just got a whole lot better and the Canadian Navy will get a few new ships out of the deal.
For more details on the estimated economic impact of the shipbuilding contract on the Nova Scotia and Canadian economy, visit www.shipsstarthere.ca and click on the Canadian Impacts link.
David Campbell is an economic development consultant and columnist based in Moncton. He also authors a daily blog on economic issues in Atlantic Canada which can be found at www.davidwcampbell.com.