Canada is facing an investment crisis, according to a recent report from the Montreal Economic Institute (MEI). The study compares foreign and domestic investment data from the end of the Stephen Harper era to the end of the Justin Trudeau era, revealing a troubling trend.
Investment Gap Widens
In 2014, the gap between Canadian investment abroad and foreign investment in Canada was roughly 14%, meaning Canadians invested slightly more abroad than foreigners invested in Canada. By 2025, that gap had more than doubled, with Canadian investment abroad now approximately 33% higher than foreign investment in Canada.
While Canadian firms and pension funds investing abroad can indicate global competitiveness, it raises critical questions: Why are returns consistently perceived as stronger abroad? Why are Canadian companies investing so much more overseas than foreign companies invest here?
Underinvestment at Home
Canadian firms are also investing less domestically. Investment in machinery and equipment—the tools, robots, and assembly lines that drive productivity—fell by 3.3% between 2014 and 2024, despite population growth and modest economic expansion.
Investment per worker has plummeted. In 2014, Canadian companies invested roughly $20,900 per worker; by 2024, that figure dropped to just $17,600. Business investment per worker in Canada is now only 55 cents for every dollar invested in the United States.
Global Comparisons
Comparing Canada to other countries reveals even more concerning numbers. Business investment per worker in Canada, adjusted for inflation, fell by 16% between 2014 and 2024. In contrast, U.S. business investment rose by 26% over the same period. Canada is also trailing the United Kingdom, the European Union, and much of the OECD.
Research and development spending is another key indicator. In 2000, business spending on R&D in Canada represented 77% of the OECD average. By 2023, that number had collapsed to 57%. Remarkably, Amazon alone now spends nearly three times more on R&D than Canada's entire business sector combined.
Policy Changes Needed
Reversing these trends will not be easy. Years of underinvestment cannot be undone overnight. The government of Prime Minister Mark Carney appears to believe more government spending is the answer, but the report argues otherwise. Only the private sector can reverse the decline, and that requires major policy changes from Ottawa and the provinces.
To reverse these trends, governments must lower corporate taxes, reduce taxes on upper-income earners, scrap the industrial carbon tax, and cut job-killing regulations. Half-measures will not work. Without decisive action, Canada's investment crisis will deepen, productivity will continue to lag, and Canadians will be poorer.
Dr. Jay Goldberg, a political scientist and fellow with the Frontier Centre for Public Policy, authored the report.
