Losing Head Offices
Posted August 22, 2014
When Manulife bought John Hancock Financial in 2004, the package included Maritime Life, a wholly owned subsidiary. At the time, Maritime had 3,000 employees of whom 1,250 were in Halifax. Partly through the efforts of Nova Scotia Business Inc. (NSBI), the government, and others, Manulife agreed to retain a large number of positions in Halifax.
Currently there are 750, and a recently announced payroll rebate with NSBI provides the opportunity for future growth. In addition, 300 of Maritime’s information technology positions were absorbed by CGI, a large IT firm headquartered in Montreal.
So all was not lost. But the job numbers greatly understate the hit to the local economy. The positions that were eliminated included almost all of the high paying ones—actuaries and accountants, investment and marketing professionals, senior executives. Together they paid a lot of income tax.
As well, they were senior volunteers, donors, and board members at universities, hospitals, and cultural and community organizations.
Maritime was a very important customer for many local businesses—printers, law firms, specialty IT companies, and others. Maritime was one of KPMG’s largest audit customers in Atlantic Canada. A regular parade of employees, distributors, and suppliers from other parts of Canada made a healthy contribution to travel and hospitality businesses.
When Stantec bought engineering firm Jacques Whitford in 2009, a similar pattern emerged. Like Maritime, they had more than half of their employees in other cities, but the direction and control came from Halifax. Immediately after the acquisition, the 100 well-paying corporate office jobs were lost. So was a wealth of procurement and related activity.
Likewise Ocean Nutrition, acquired by Dutch global life-science firm DSM, has lost its corporate office jobs as well as much of the research and development work that had been done in Dartmouth. On the other hand, it continues to be a good source of jobs, especially for Mulgrave where an expansion has been announced this week, albeit with extensive government support.
These examples provide a reliable indicator of what will happen when BCE completes its acquisition of Bell Aliant. BCE says it anticipates $100-million of pre-tax synergies once expense and other duplications are eliminated. They refuse to provide job numbers, but a reasonable guess is that 1,000 jobs will disappear, largely in Atlantic Canada. (The legislation that allowed Robert Stanfield to prevent a similar proposal in 1966 no longer exists.)
The reductions will come in part from loss of corporate office jobs but they will also result from loss of revenue to local suppliers of professional and other services.
Many of the executives who have been valuable community contributors will have to move out of province if they want to keep their jobs. Employees providing front line service to customers will be less impacted.
Opposition politicians have been energetically calling for the government to do something. Dave Wilson of the NDP wants to make sure that BCE knows “… how important those jobs are for Nova Scotians and for our province.” It seems unlikely that they are uninformed on that topic.
This sort of foot-stomping is unproductive. Even if they are temporarily pushed into some sort of response BCE will, sometime when politicians are busy with other matters, do what is in their corporate interest. Meanwhile the province will have signalled that it is hostile to business. Manulife continues to employ Nova Scotians because it is a good business decision, not because of political posturing.
PC leader Jamie Baillie and interim NDP leader Maureen MacDonald called for a response from the One NS Coalition, which is responsible for moving forward with the Ivany report. In response Bernie Miller, Deputy Minister of Planning and Priorities, argued that dealing with the Bell Aliant transaction is not what the coalition is about. Rather, it is developing a “10-year strategy and action plan for economic transformation and renewal for Nova Scotia.”
Miller is right. It is very unhelpful to long term strategic planning to periodically divert attention to issues of the day. If government should do anything about Bell Aliant, the OneNS coalition is not the right vehicle.
But given the tight focus on its mandate, and the sense of urgency that pervades the Ivany report, one might expect great strides by now in developing the strategy.
The Ivany report on Building Our New Economy was delivered on Feb 12, 2014. It took four months for the government to launch the One Nova Scotia coalition. Six months after receiving the report no further progress has been reported. The website outlines worthy goals, but there is no indication of a timeline.
Miller’s letter tells us that three worthwhile projects are underway, headed by credible private sector leaders. That is not a lot to show for the six months since release of the Ivany report. One does not get the impression of an engaged and energized process.
Nova Scotia needs a refreshed environment where entrepreneurs are frequently establishing new and successful businesses headquartered in Nova Scotia, and where acquiring companies from elsewhere are delighted to retain as many staff as possible because of the strong talents available and the attractive business environment.
The latest unemployment numbers continue an alarming trend. The coalition has a good agenda for developing sustainable improvements to our economic climate. It is time to inform and engage Nova Scotians. And pick up the pace.