How to set up a business in Canada

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Canadian PM Justin Trudeau

While UK firms traditionally dream of ‘breaking America’, a growing number are focusing on its unassuming northern neighbour. With its strong economy, trade-friendly government and pride in its British links, Canada has plenty to offer SMEs, as our local experts explain

Toronto’s Pride parade last summer was a kaleidoscopic whirl, featuring hundreds of rainbow flags, troupes dancing on floats – and a couple of men dressed as Mounties brandishing a “Just married” sign.

Amid the throng, one sight grabbed the world’s attention: Justin Trudeau’s ankles. His multicoloured socks, emblazoned with the phrase “Eid mubarak”, were a deliberate sartorial choice that marked the Canadian PM’s acknowledgment of both the Muslim holy festival and LGBT+ rights.

Trudeau’s footwear diplomacy was emblematic of Canada’s efforts to become a progressive liberal utopia. It also added to the ongoing global swoon-a-thon generated by the panda-cuddling, quantum-physics-explaining, refugee-embracing, internet-meme-friendly leader.

“Trudeau has put a spring in the step of many Canadians,” says Peter Richardson, a British associate at global law firm Baker McKenzie, who moved to Toronto in 2013. “When you arrive here, it feels like you’re walking into the future.”

Canada has played second fiddle to its noisy next-door neighbour for decades, with British exporters tending to treat the Great White North as an afterthought to the US. Not any more: Canada’s economy is thriving and its government is working its socks off to woo foreign investors.

The differences between Trudeau and his wall-building counterpart south of the 49th parallel couldn’t be starker. Not for nothing did Canada’s official immigration website crash on the night of Donald Trump’s election. Last year Stanford economist Raj Chetty provided compelling research to suggest that the American dream of upward mobility is dead in the US, but alive and well in Canada.

Some have likened the nation’s growing joie de vivre to that of Cool Britannia in the mid-1990s. Its largest city and financial centre, Toronto, has traditionally struggled to be taken seriously – “It’s like New York, but without all the stuff,” was comedian Steve Martin’s dismissive summation – but there is a real buzz here now.

Toronto ranks seventh on the Z/Yen Global Financial Centres Index of competitiveness, while its metropolitan area produces more than half of Canada’s manufactured goods. And, with more than 140 languages spoken here, Toronto is officially the world’s most multicultural city.

Public transport in TorontoBUILDING THE FUTURE

The population of Toronto’s greater metropolitan area is growing fast and set to reach 9.6 million by 2041. The relatively archaic infrastructure of the conurbation and the wider province of Ontario therefore requires upgrading to cope with the increasing demands being placed on it.

One Briton – Andy Byford, a Transport for London veteran – has been credited with “saving” Toronto’s subway system, having recently overseen a five-year modernisation project.

The planned expansion of the city’s Go Transit rail network offers further opportunities for British expertise, according to Kevin McGurgan, British consul general in Toronto. He highlights its commercial potential to UK firms “involved with everything from project management to the upgrading of lines and signalling equipment. This is all the stuff that Crossrail has been doing so well.”

Meanwhile, Toronto’s waterfront is being developed into a futuristic “smart city”, packed with sensors recording everything from traffic flows to pollution levels. This project has proved controversial, not least over concerns about what might be done with the data, particularly because Sidewalk Labs – a Google-backed venture – is managing it.

 

Operis is a British company that’s already taken advantage of Canada’s boom. The London-based firm established its second office in the shadow of Toronto’s CN Tower in 2014. It builds financial models for infrastructure projects such as Ontario’s Highway 407 upgrade and estimates that 30 per cent of its business now comes from Canada.

“There’s more of an impetus to build and develop stuff in Canada,” says its MD, Paul Myers. “It sounds flippant, but we chose Toronto over New York because the Queen is on their banknotes too. Obtaining work permits here is easier than it is in the US and our business cultures are more similar. The cost of a Manhattan office would have been much higher as well.”

British firms can now bid for public contracts in Canada, thanks to the recently inked EU-Canada comprehensive economic and trade agreement (Ceta), which has also removed 98 per cent of import tariffs.

“If you were a first-time exporter wanting to land softly in a market that feels broadly Anglo-Saxon, with a similar rule of law, Canada would seem very natural to you,” McGurgan says.

London’s Truefitt & Hill, recognised by Guinness World Records as the world’s oldest barbershop, exports its grooming products to Canada. Linda Mountford, MD of its North American operations, reports that “our savings are huge – thousands of dollars. Before Ceta, we’d typically pay duty of up to 7 per cent on our Canadian exports. Now we just need to spend two minutes filling in a form.”

British beverage producers are also poised for success in Canada, thanks to the elimination of duties on many alcoholic drinks. Isle of Harris Distillers started exporting gin to Canada last year after its MD, Simon Erlanger, attended a business “speed-dating” event with the Liquor Control Board of Ontario, although he admits that Canada hadn’t been at the top of his list of potential foreign markets.

Erlanger, who won in the medium-sized business category of IoD Scotland’s Director of the Year Awards this year, was initially “nervous, as our unit selling price is C$86 (£47), which is almost double that of the other gins”. Yet the initial order of 1,200 bottles sold out within a few months of hitting Canadian shelves in October 2017, which he says was “pretty much unheard of” at the time.

Toronto at sunsetPOST-BREXIT PROMISE

The UK’s impending withdrawal from the EU may make British companies worry that they have only a short period in which to capitalise on Ceta, but Trudeau has promised a “seamless transition” to a new Anglo-Canadian trade compact. Indeed, the broad scope of Ceta, which took seven years to negotiate, means that the deal has been suggested as a template for the UK’s post-Brexit agreement with the EU.

David Davis, the former secretary of state for Brexit, even called it “a perfectly good starting point for our discussions with the [European] Commission”.

The North American free-trade agreement can also be used by British firms to export goods from Canada to the US, even though Trump has decried it as “the worst trade deal ever signed”. Scottish coach builder Alexander Dennis, for instance, sells vehicles to the US from its factory in Vaughan, just north of Toronto.

Theresa May even mooted the US-Canada frontier ($800m of goods move between the US and Ontario alone daily) as a model for the post-Brexit border between Northern Ireland and the Republic, although that idea has been dismissed by her Irish counterpart, Leo Varadkar.

Encouraging foreign investment is a priority for Trudeau, while his policy on diversity is helping to boost Canada’s standing on the global stage. He appointed a 50:50 gender-balanced cabinet (“because it’s 2015”) that also included the country’s first Inuk minister.

The self-styled “proud feminist” challenged other national leaders at the 2018 World Economic Forum (WEF) meeting at Davos in January to tackle sexual discrimination. A recent McKinsey study found that tackling gender inequality at work could add C$150bn (£83bn) to the Canadian economy by 2026.

Trudeau’s Canada is also a place where the national anthem will soon be gender-neutral (the line “in all thy sons command” is set to become “in all of us command”) – as will its passports, which are to offer applicants a gender-free “X” option to tick. Over in the western province of British Columbia, the law has been amended to prevent employers from obliging female workers to wear high heels in the workplace.

Despite Trudeau’s commitment to diversity, McKinsey still identified a “substantial gender gap” at corporate board level last year, finding that 85 per cent of CEOs in Canada were men. Canada has also fallen to 16th place in the WEF’s global gender equality ranking. In 1995 it was top of the list.

With half of its residents born overseas, Toronto revels in its multiculturalism. Visitors spending a Sunday afternoon at a Kensington Market block party, watching an ethnically mixed crowd socialising over Syrian kofte and Haitian rum, may well wonder why this doesn’t happen in other cities. Corporate boardrooms are yet to reflect this mix, though: only 4.5 per cent of directors in Canada’s top 500 firms are from ethnic minority groups.

Richardson says he was heartened by the diversity of the people he met at work when he moved to Toronto from the UK. He adds that Canada’s aboriginal culture is being celebrated with more gusto under Trudeau’s leadership: “When you attend big conferences, there’s usually a recognition of the indigenous land on which the event is being held, as well as an acknowledgment to the indigenous community.”

Many Torontonians would argue that such values have always been part of the Canadian identity. “There’s definitely an underlying good streak of culture here that doesn’t like racial inequality, sexism and homophobia,” Richardson says.

Canadians have a strong reputation for courteousness too. Cathy Ridley, the founder and chairman of London-based relocation firm MovePlan, found this to be true when her company opened its Toronto office in 2016. “Their politeness really shines through,” she says. “Canadians are incredibly generous with their time as well – our lawyer in Toronto went out of his way to introduce us to people.”

Richardson notes that Canadians’ extreme politesse could be frustrating for any business leader who likes to get to the point. “Sometimes you have to dig and scratch to find the nub during negotiations, because people here will talk around an issue before attacking it head on,” he says.

CN Tower, Toronto

DUE NORTH

Canada’s friendly internationalism may have encouraged US celebrities including Barbra Streisand and Lena Dunham to talk about moving here after Trump’s election. While the world waits for them to relocate, Toronto is already bringing other American workers over the border: those in the tech industry. The Toronto-Waterloo “digital corridor” is North America’s third-largest and fastest-growing hi-tech centre, having created 22,500 jobs in 2015 alone.

After an executive order by Trump last year clamped down on H-1B visas – widely used by US hi-tech firms to bring in foreign talent – Canada’s IT industry started a bold recruitment campaign. “The situation in the US is making people who’d normally go there think about starting their own business in Toronto,” McGurgan reports.

But incoming entrepreneurs may find Canada’s federal structure – under which business is conducted at a provincial level – perplexing. “The only way that we can sell gin in Ontario is when its liquor board orders it to sell in its state-controlled stores,” says Erlanger, whose product is still unavailable in supermarkets. McGurgan recommends finding a local distributor and, possibly, a lobbyist who can help with government contracts.

British exporters must also provide identity declaration in both French and English on their labels. This is, after all, a nation whose leader tweets bilingually. It’s another example of Trudeau’s conspicuous cultural awareness, which he’ll doubtlessly demonstrate when he hosts the G7 summit in Quebec – and if he returns to Toronto for the 2018 Pride parade – this summer.

While the spotlight on Canada shows no sign of dimming, McGurgan believes that British businesses have much to gain here if they move quickly. “Take the small risk, quite frankly, of doing business in Canada,” he urges. “You don’t want to wait and suddenly find that you’re up against a more competitive market than you have at the moment. Now is the chance.”

Find out how IoD member, Cathy Ridley, set up her business in Canada’s largest city

About author

Christian Koch

Christian Koch

Alongside his work for Director, Christian has written features for the Evening Standard, The Guardian, Sunday Times Style, The Independent, Q, Cosmopolitan, Stylist, ShortList and Glamour in an eclectic career which has seen him interview everybody from Mariah Carey to Michael Douglas through to Richard Branson with newspaper assignments including reporting on the Japanese tsunami and living with an Italian cult.

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