St. Albert’s business community is getting less diverse and is heavily reliant on three sectors according to a new study by the city’s economic development department.
The St. Albert Business Diversity Study was completed in January and made public earlier this month.
The goal of the study was to create a tool that would measure St. Albert’s business diversity and help track the outcomes of business attraction and retention efforts and council policy decisions ahead of new industrial lands coming online.
Senior corporate analyst Rhys Chouinard, author of the report, created an index that objectively measures diversity on a scale of zero to 10, by assuming that the ideal diversification was an equal share of businesses in each sector of the economy.
When analyzing North American Industry Classification System codes for open business licences in 2015, Chouinard found that St. Albert scored around 2.1 on his diversity index.
The report describes the current business type breakdown as “fairly undiversified,” with 67.6 per cent of all businesses falling into one of the top five categories: retail trade; construction; other services (excluding public administration); health care and social assistance; and professional, scientific and technical services.
The report also showed that over the last 15 years St. Albert’s business licence distribution has become less diverse – with the index falling on average about six per cent.
Chouinard said this trend is not surprising in a smaller community like St. Albert and that the results don’t necessarily mean that the city’s economy is unstable.
“If you have five key industries, but those industries are very stable you still have your eggs in a very small number of baskets, but those baskets are very stable,” he said.
But they also have a local focus rather than a global one, which Guozhong Zhu, assistant professor in the University of Alberta School of Business, says could be problematic.
The interdependence and local nature of accommodations, retail and food services make them more susceptible to external shocks and the subsequent economic turmoil faced by the province.
“Basic finance tells us that if you want to achieve diversification you need to find things that are not related,” said Zhu. “Right now, one shock can hit everybody.”
One trend identified as a potential place to focus business and retention strategies was construction – the second largest sector in St. Albert – given the number of external companies that do business in St. Albert. Construction made up 71 per cent of the 728 non-resident business licenses issued from January to May 2015.
“I think it makes much more sense to support businesses that are competing globally,” said Zhu, explaining that diversification shouldn’t be measured by an equal share of businesses in each industry, but instead by the independent and global nature of each business.
Zhu said it was a shame to see that professional, scientific and technical services slipped to the fifth ranked industry – though the percentage share of around 12 per cent was not altered – and that manufacturing holds such a low percentage share in St. Albert.
According to the study, the total number of business licences increased by about 5.7 per cent annually over the past 15 years – “a healthy increase compared to population growth” of 1.5 per cent annually.
However, business licence totals began to plateau in 2010, slowly dropping since by about 1.1 per cent annually, which could be indicative of land constraints said Chouinard.
“Tracking a trend like this, when the Anthony Henday business park is about to fill up, council might expect a plateauing of the business licences again and that might tell them ahead of time that they need to allocate more space to non-residential,” he said.
