By Jock Finlayson, ICBA Chief Economist
As B.C. struggles to gain economic traction after a disappointing 2024, the outlook for project investment will be key to shaping the growth profile over the next few years. The province is coming off an extended period during which just four energy “mega-projects,” accounting for almost $100 billion in cumulative investment, played an outsized role in driving overall economic growth. Completion of the TMX expansion project, and the winding down of construction on the Coastal GasLink Pipeline, LNG Canada’s giant Kitimat facility, and the Site C dam and reservoir, herald a deceleration in investment spending at a time when other motors of B.C.’s economic engine are sputtering under the weight of waning competitiveness, record levels of household debt, and dwindling business activity in the forestry and manufacturing sectors.
The B.C. government’s Major Projects Inventory (MPI) provides a handy summary of current, planned and possible construction projects across the various regions of the province. Included in the MPI are projects valued at $15 million or more, encompassing all segments of the economy – multi-family residential construction; commercial, industrial, and engineering construction; and public sector projects.
As of the first quarter of 2024, there were 967 projects listed in the MPI, totaling $368 billion in estimated capital spending were they all to go forward. Importantly, 309 of these projects (representing $116 billion of capital costs) are either in the public sector or depend on government funding to proceed – underscoring the importance of the public sector in today’s B.C. economy.
Turning to projects already underway, these add up to $170 billion in estimated capital outlays. The remaining projects are classified as planned or proposed. Based on history, it’s safe to assume many of these – particularly in the industrial and commercial sectors – will end up being cancelled, or indefinitely shelved. Public sector projects are more likely to advance than those planned by private sector companies and business consortia. The MPI report identifies $30 billion of capital projects that were “on hold” as of the first quarter of 2024.
Projects by Broad Industry Category
The following figure shows the distribution of major projects by broad industry category as of the end of Q1 2024. Note that it captures projects that have started as well as those in the planned/proposed stage. Measured in dollar terms, the mining and oil and gas sector accounts for the largest slice of actual/planned capital spending (25%), followed by residential/commercial, transportation & warehousing, and utilities (this category includes government-owned B.C. Hydro).
Figure 1
Manufacturing stands out as an area of weakness, despite the presence of a number of significant manufacturing industries in B.C. (e.g., lumber, pulp and paper, food processing, metal fabrication, smelting, and chemicals). In part, this reflects the deteriorating domestic business environment for manufacturing firms and the related decline of activity in many segments of the sector. Of particular concern, all of the large-scale manufacturing projects counted in the latest MPI are listed as “proposed,” with none being either recently completed or underway.
The combined residential/commercial sector looms large within the overall B.C. project universe, making up 524 of the 967 projects in the latest MPI report. Fully three-quarters of these are in the lower mainland/southwest region, where the province’s population is concentrated.
Mention should be made of the upside that exists for major investment in the B.C. natural gas/LNG sector. Cedar LNG announced in June 2024 that it had reached a final investment decision on its U.S.$3.4 billion floating LNG facility in the traditional territory of the Haisla Nation; this project has already secured environmental approvals from the B.C. and federal governments. Woodfibre LNG is proceeding to build its liquefaction and natural gas export facility near Squamish, despite some continued local opposition. Rockies LNG Partners is working with Western LNG and the Nisga’a Nation on the proposed Ksi Lisims LNG floating liquefaction project near Prince Rupert, B.C. Finally, there remains a possibility that LNG Canada could move forward with phase two of its massive Kitimat liquefaction project following the imminent completion of phase one. It must be noted that the latter two projects – unlike Cedar LNG and Woodfibre LNG — have not gone through the environmental assessment process, underscoring the multiple public policy and regulatory obstacles that hinder large-scale industrial investment in British Columbia.
Turning to mining, B.C. also has tremendous investment prospects. The Mining Association of B.C. counts 16 potential “critical minerals” projects valued at $36 billion that could advance with an investment-friendly regulatory framework in place along with adequate political support. The NDP government has signaled an interest in developing the province’s “critical minerals” sector; time will tell whether policymakers in Victoria are serious about this pledge.
The utilities sector is another big capital spender, accounting for 14% of the projects in the MPI measured by estimated capex. B.C. Hydro and Fortis B.C. loom large in this category, which also includes sewage treatment facilities.
Conclusion
The updated outlook for project construction comes at a time of unusual economic uncertainty, with the threat of sweeping American tariffs on the horizon, an unsettled global geopolitical backdrop, and political chaos in Ottawa. Most forecasters see the B.C. economy picking up a bit of speed in 2025-26, assuming the U.S. doesn’t implement President-elect Trump’s promised across-the-board tariffs on Canadian exports. ICBA Economics shares that view, although we have penciled in a slower growth profile than some other forecasters. Even optimistic prognosticators believe real (inflation-adjusted) business non-residential investment will fall again in B.C. in 2025, on the heels of a steep decline in 2024. Nor is there much to cheer about on the residential investment front: housing starts are expected to slide or at best remain flat in B.C. over 2025-2026.
All of this shines a spotlight on the need to advance significant-sized projects across the industrial and commercial sectors, in the sprawling public sector, and in the multi-family segment of the residential development industry.
Getting more projects approved will require a greater willingness on the part of governments at all levels to speed up review and permitting processes and to address the other tax and regulatory obstacles that make it so difficult to attract investment and build projects of all sizes in Canada.
One can only hope that government officials in Victoria and at the municipal level will recognize that B.C. operates in a very competitive environment for capital and do what they can to convert more of these investment opportunities into shovels in the ground. Â Failure to do so will compound the challenges we face with affordability, innovation and declining real incomes.
