Halifax is growing, its productivity is slowing

I spent a few days last week in Halifax, with our CEO Dave McKay , and it was hard not to feel a new bounce to the city’s step.?

The construction cranes — and yes, construction roadblocks — are the first sign of renewed growth. The packed restaurants, and crowded boardwalks, speak even more to the city’s swagger (and it’s not even tourist season yet).?

All that activity is good for the economy but not necessarily helpful to our collective productivity and housing crises. In that respect, Nova Scotia is a bit of a microcosm for the country. Nice bursts of growth, thanks largely to the services sector, construction and immigration. But the economy is still struggling to create the kind of wealth needed for the future — to attract more investment, generate higher incomes and create more of the businesses we need for the next generation of prosperity.?

With the right approach, Halifax can change that and even become an Austin of the north — a magnet for talent and tech, and gateway to the future.?

Here are a few ideas that may help:

1. Hybrid work

Halifax became a poster child for remote work during the pandemic, as professionals and tech workers migrated to the city and surrounding South Shore communities for an idyllic blend of connectivity, culture and chill. That’s become harder with higher housing costs and a return to in-office work cultures. I met with a range of local employers who are competing for talent with a new hybrid model that brings people together in the city for teamwork and still allows individuals to build the rest of their days around their preferences. The region will need to continue to promote that kind of workplace innovation if it wants to attract and keep the world-class talent it’s drawn over recent years. Flexible housing, more rentals and lots of broadband will be important, too, as will the city’s great music scene.?

2. Scale-ups

A lot of that young migrant talent should be coming to Halifax for its start-up scene. Indeed, they already are, as the incubators and accelerators in the region are running at capacity. Trouble is, they’re not spinning off enough growth companies — the ones that could become the next Shopify (Ottawa), Clio (Vancouver) or Point Click Care (Toronto). The local lifestyle can be a distraction, but the same can be said for Seattle and San Francisco, where sailing, sunning and skiing didn’t get in the way of Starbucks or Salesforce. Halifax has fewer than 10 tech start-ups that are currently positioned to be unicorns. That can change, and much of it comes down to mindset — a key point of our new report on “Canada’s Growth Challenge.” We can all do more to champion, coach and cajole the start-ups that should be the next big thing, based in Halifax.

3. Taxes

A growth mindset doesn’t grow on its own, especially when it’s taxed, quite literally. When you’re a challenger economy, you need every competitive advantage you can develop, and that includes taxes, for individuals and businesses. It’s not just a Nova Scotia issue, but the province can do more to compete with Texas, and not just Ontario. I had dinner with a couple of leading tech entrepreneurs who said they’re wondering why they stay domiciled in Canada, and Nova Scotia, when most of their business is in the U.S., where their effective tax rate would be much less — and even more so under Ottawa’s proposed tightening of the capital gains exemption. It’s another example of where Canada needs to think more like Singapore, constantly competing for talent and capital — the stuff that can leave by airplane or app.?

4. Exports

Nova Scotia should be an export machine for more than people. The province’s population (1 million) is too small to be anything but that. Instead, the province is one of the least reliant on exports as a share of its GDP (11% compared to 33% for Newfoundland and Labrador), and is not showing any lift-off in trade despite improved access to European and U.S. markets. One illustration of the problem: Nova Scotia has some of the world’s best aquaculture operators and yet they’re a smaller share of the economy than construction and a smaller share of exports than rubber tires. The province could be a significant food exporter to the world, with a bit more of a growth focus. It can be a software and data hub, too, with a concerted focus on wind energy and hydrogen.?

5. Health care?

Like all of us, Nova Scotia’s not getting any younger. That means the demands for health care will only grow; witness the biggest investment project in the area, the new QEII Halifax Infirmary. Health care is a bigger part of the economy (10.9%) than manufacturing, so there’s a double incentive to make it more productive. The province can (and should) do that by being a trailblazer for health care innovation. One entrepreneur we met is trying to develop a model to move people from hospitals to transitional facilities that are less costly to the system. It would remain public, and be cheaper to the public purse. The region’s health care facilities, including that big new hospital and medical schools, can also become a magnet for outsiders looking for services, for a fee. A bit of Boston thinking wouldn’t hurt.?

6. Housing?

It’s hard to go anywhere in Nova Scotia without hearing a vigorous debate about housing. Like the rest of Canada, the province (and Halifax especially) came out of the pandemic with a serious imbalance between supply and demand. But unlike much of the country, the region relies heavily on rental units — and they’re just not being built fast enough. Pressure is especially acute on affordable housing, as relatively low income levels for many in the province can’t keep pace with the market. A sign of the times: Habitat for Humanity this month suspended a local project because of cost inflation. Halifax’s regional government has finally agreed to get serious about the slow pace of building permits, including for rentals. But much more will be needed to increase the supply of homebuilders and skilled trades, and also support rents. One idea: use social bonds to help the municipality raise capital for social housing.

Halifax, and Nova Scotia, have long been centres of innovation, from the first hockey skate and odometers to, yes, the donair. It can use that creative spirit in an ever-more competitive world, to continue to attract people and capital from around the world, while preserving its unique place on the planet. Like the province’s motto says, “stronger together.”

You can read more about the Nova Scotia economy in the last report (https://thoughtleadership.rbc.com/nova-scotias-economic-renaissance-still-faces-hurdles/) from RBC economists Robert Hogue and Rachel Battaglia .?