Canada: 2010 Bennett Jones Business Forecast

As the Canadian economy slowly recovers, Bennett Jones provides its predictions of trends that will influence Canadian business in 2010.

Short Term Economic Outlook Improves

In the first half of 2010, Canadian economic growth is likely to rebound to about 3½ percent (at annual rates) driven by stimulative fiscal and monetary policy, inventory rebuilding, stabilization of the housing sector, and relatively robust growth in emerging markets. The unemployment rate is likely to peak at about nine percent. The policy interest rate should remain close to zero and credit spreads will narrow a little bit more.

The remainder of 2010 is highly contingent on governments' fiscal exit strategy. Domestic demand (consumption and business investment) should grow at three percent or more (at annual rates), but this will be off set somewhat by the slowing growth of government expenditures and a small drag from net exports. The policy rate of the Bank of Canada will begin to increase modestly although core CPI inflation will likely remain below two percent. In the face of strong Asian demand, commodity prices (except natural gas) will likely continue to firm. Commodity strength and continuing U.S. dollar weakness should contribute to modest appreciation of the Canadian dollar. Credit spreads should be stable but mid and longer term rates should rise as a consequence of increased rates on government bonds.

David A. Dodge, O.C., Senior Advisor at Bennett Jones LLP, Former Governor of the Bank of Canada

Economic Recovery a Priority

Prospects for an early Canadian election are receding as the official opposition works on longer term rebuilding. The Harper government will have more of a free rein in Parliament, focused on the economy. However, the political difficulty of making serious expenditure cuts, an unwillingness to increase taxes and relatively sluggish economic growth prospects will make it almost impossible to restore fiscal balance in the near term.

Credit Improves but Insolvencies Continue

Bank credit is beginning to loosen, though on tight terms. Consistent with previous recessions, insolvencies will continue to be a major market force for a number of years after the recession troughs. Lenders will more aggressively pursue rights as asset values improve and overall confidence begins to be restored. Unlike 2009, a combination of factors suggests a greater proportion of restructurings and fewer outright liquidations.

Revival in the Oil Patch

With oil prices having stabilized, or at least bounced off the floor, Alberta oil sands mega-projects will continue to come back to life, in post-boom moderation. Increased scrutiny of environmental issues will require some managing. Producers and midstream companies will jockey for land and infrastructure positions, particularly in north-east British Columbia. At the junior end of the market, which has largely resisted consolidation so far, continued moderate gas prices combined with falling production will push gas-tilted players to look for a partner. Finally, all eyes will be cast eastward for the next major investment from Asia.

Increasing M&A Activity

The warming trend in the mergers and acquisitions market will continue as still depressed stock prices combine with gradual improvement in credit markets. Income trust conversions (and acquisitions) will pick up as the December 31, 2010, deadline ending tax-free distributions approaches. The renewed commitment to the business judgment rule in the BCE decision and recent decisions of securities regulators in Ontario and Alberta may give directors more leeway in repelling hostile bids with poison pills. Watch for competing bidders and other dissidents to invoke the Canadian government's new power to review foreign investments on national security grounds as a competitive strategy.

Thickening of the U.S. Border

Continued high unemployment and an uncertain economic recovery in the U.S. make the prospect of an early unwinding of Buy America unrealistic. Government to government negotiations may continue but with little result. Heightened Canada-U.S. transfer pricing scrutiny, coupled with more aggressive customs audits, mean Canadian businesses can also expect to face more and potentially larger transfer pricing reassessments on one or both sides of the border.


The buzz will be around sustainability as businesses focus on eliminating or reducing environmental and social risks. Business continuity and business reputation will hang in the balance. Since Canada wants to dovetail its climate change policies with the U.S., political gridlock in Washington means little likelihood of serious greenhouse gas regulations being enacted in Canada in 2010. Watch for enhanced consultation between the Canadian government and industry as negotiations continue post-Copenhagen.

Executive Compensation Still a Hot Topic

Watch for increased investor interest in absolute pay levels, payment for performance, alignment (both in terms of how incentives are earned and how and when equity bonuses can be monetized), compensation that does not incent behaviours above acceptable risk profiles, and clawback mechanisms (such as when financial restatements demonstrate that bonuses were not properly earned). The Say-on-Pay campaign will continue, with more companies committing to advisory votes on their compensation reports.

Focus on Director Protection

Directors are getting the message that essential indemnification arrangements and D&O insurance must be customized to suit particular situations and examined closely to ensure that the fine print will not impair the coverage expected. Independent advice will increasingly be sought by new or independent directors, particularly as significant transactions are contemplated.

Ongoing Pension Reform

Though pension underfunding concerns have been partly alleviated by market recovery, pressure will mount on governments for longer term pension reform. Cost concerns will continue to influence business decisions respecting pension plan design and funding, while the potential for litigation will drive a continued focus on pension governance (including transparency) and disclosure to members.

Increased Vigilance for Fraud

With Canada having one of the highest rates of reported corporate fraud, expect more scrutiny of boards of directors, audit committees and management as to how they confront fraud risk and loss. An internal fraud prevention strategy, as well as the ability to quickly investigate a fraud and recover assets, will be more important than ever.

More Certified Class Actions

Reflecting U.S. experience, defendants in Canadian class actions have strongly resisted certification. But, with recent court decisions lowering the bar for certification, expect to see more class actions proceed past certification and a far greater number of securities class actions, many of them of tenuous merit.

Return of Commercial Real Estate

With renewed access to the public markets and improved borrowing costs, watch for an increase in activity levels by Canadian real estate entities both within Canada and internationally (particularly in emerging markets). Pension funds and other institutional investors will continue to seek the safe return of stable income-producing commercial real estate assets.

Ample Supply of PPP Projects

The Canadian government's $3.3-billion infrastructure plan will bring more projects to the growing Canadian public-private partnership (PPP) market. Financing structures will continue to evolve as financial markets recover appetite for longer term investment. International proponents will continue to grow their participation in this stable and well-developed market.

Technology Sector Up

With government stimulus spending now reaching the technology sector, the industry is poised for a considerable recovery. U.S. investors will once again explore Canadian financing opportunities, to some extent filling the void left by a domestic venture capital and private equity industry that has been unable to raise new capital. Tech spending will be up and, with that, revenues and IPO plans.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions