Sapling Financial Consultants report reveals 31% of Canada’s economy is shielded by lack of competition
Sapling Financial Consultants’ new report, Canada’s M&A Market Set for Growth Amidst Competition Barriers in Key Sectors, led by senior analyst Santiago Munera. The report reveals restrictions on competition are shielding one out of every three dollars of economic activity in Canada. The report uncovers the implications of increased deal-making in sectors sheltered from competition and forecasts increased M&A activity in 2025, which will spur innovation, lower consumer costs and create jobs.
An analysis of 2023 data reveals when it comes to broader regulatory constraints, it finds that nearly 31 per cent of Canada’s economic activity is being affected by restrictions on competition, down from 35.1 per cent in 2017, when factoring in broader barriers that limit the mobility of goods and services across provincial lines. An analysis calculated simply as the GDP contribution of highly sheltered industries falls to approximately 20.64 per cent, down from 22.25 per cent in 2017, largely due to foreign investment restrictions, government intervention, state-owned monopolies and interprovincial trade barriers.
“The data tells a compelling story about the state of competition in Canada,” said Rob Hong, co-founder & CEO of Sapling Financial Consultants. “Using 2023 data, we see some modest progress, with the share of the economy shielded from competition falling from 22.25 per cent in 2017 to approximately 20.64 per cent. However, when factoring in broader restrictions such as interprovincial trade barriers, occupational licensing, and healthcare regulations, nearly one-third of Canada’s economic activity — 31 per cent — remains affected by competition-limiting policies. This underscores the critical need for reforms to reduce these barriers, foster innovation and unlock the full potential of our economy.”
The report’s outlook in 2025 shows that increased M&A activity is set to drive economic growth, innovation, and job creation, but competition barriers will limit these benefits’ full potential. Telecom, utilities and renewable energy are set to gain from significant investments and modernization next year. Policymakers must prioritize reducing competition barriers, by not addressing regulatory challenges, the grocery retail sector will continue to see high levels of consolidation.
Key predictions and implications of increased deal-making in 2025:
- Telecommunications and Broadcasting: Consumers, especially in rural areas, will face high prices and limited choices without easing telecommunications foreign investment restrictions or introducing new competitors.
- Finance and Insurance: M&A activities are expected to increase as companies look to diversify and scale up due to changing market conditions, including the rising impact of climate change on insurance claims.
- Oil and Gas: Investments in carbon capture technology and renewable energy integration will increase, marking a shift towards cleaner energy solutions. Consumers could continue to face price fluctuations due to geopolitical tensions and production constraints.
- Utilities and Power Generation: Consolidation will continue as companies work to scale operations to meet the growing demand for renewable energy and grid modernization. Consumers may face higher energy costs as companies pass on the expenses of transitioning to cleaner energy sources.
- Grocery Retail: The main focus will be pricing practices and market concentration, with changes dependent on significant policy interventions. Dominant players will retain control, but online grocery platforms and independent suppliers may gain traction.
Click here to download the full report.
Read more about the work we’ve done for Sapling Financial Consultants here: Sapling Financial Consultants projects a 55% annual expansion over the next three years
