Economic Potential of Future Growth at the Halifax Shipyard

March 2012

Fred MorleyExecutive VP and Chief EconomistGreater Halifax Partnershiphttp://www.greaterhalifax.com

NATIONAL SHIPBUILDING PROCUREMENT STRATEGY – QUICK FACTS

• Ottawa issued a call for bids for the two packages in 2010

• $25 Billion in combat vessel construction

• $8 Billion of non-combat ships

• 5 short-listed shipyards, 3 including Halifax Shipyard submitted bids

2

ECONOMIC IMPACT ANALYSIS

• The Greater Halifax Partnership proposed the project early 2011

• Why?– To understand the benefits to Nova Scotia and Canada of a

winning Halifax bid– Communicate those benefits

• Funding– Nova Scotia Economic and Rural Development and Tourism,

and GHP

3

ECONOMIC IMPACT ANALYSIS

• Three scenarios– winning the combat bid– winning the non-combat bid– not winning either bid

•Study timeline …first 19 years of the shipbuilding contract

• Consultants– Conference Board of Canada– Jupia Consultants

• Project began in late March; final reports in late May

4

DIRECT, INDIRECT AND INDUCED ECONOMIC IMPACTS FOR NOVA SCOTIA, 2012-30

*Direct, indirect and induced in Nova Scotia.**All dollar values except real GDP are shown in current (non-inflation adjusted) dollars. Real GDP is shown in basic prices 2002 dollars). Source: Conference Board of Canada (May 2011)*** No contract scenario covers 2018-30 period where shock occurs at Halifax Shipyard after current contracts end.

Summary Economic Impact in Nova Scotia by NSPS ProjectDollar values shown in $Millions

Annual AverageCombat Scenario

Non-Combat Scenario

No Contract Scenario***

Employment* 8,453 3,744 -1,169

Real GDP (basic prices) $661 $278 -$171

Federal Income Taxes $66 $25 -$17.1

Provincial Income Taxes $51 $19 -$13

Corporate Income Taxes $34 $13 -$9.6

HST $115 $44 -$27.3

Personal Income $447 $183 -$118

5

JOBS – WE WIN CONTRACTS

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

2,000

4,000

6,000

8,000

10,000

12,000

14,000

Change in Employment, Combat and Non-Combat Scenarios, Nova Scotia

Source: Conference Board of Canada

Combat Non-Combat 6

JOBS – WE DON’T WIN A CONTRACT

2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030-1,400

-1,200

-1,000

-800

-600

-400

-200

0

Change in Employment, No Contract Scenario, Nova ScotiaSource: Conference Board of Canada

7

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 20300

100

200

300

400

500

600

700

Increase in Total Personal Income in Nova Scotia - Combat Vessel Scenario

Source: Conference Board of Canada, Statistics Canada

$ M

illio

ns o

f Cur

rent

Dol

lars

8

9

HOW BIG IS BIG?

Universities

Combat Vessel Project*

Arts, entertainment and recreation

Accomodation services

Plastics and rubber products manufacturing

Non-Combat Vessel Project*

Transportation equipment manufacturing

Architectural, engineering and related services

Computer systems design and related services

Wood product manufacturing

0 5,000 10,000 15,000

11,030

8,453

6,138

5,217

4,645

3,744

3,262

3,021

2,311

2,031

Figure 1: Employment by Industry Comparison

* Average annual employment. Source: Conference Board of Canada.Other industry employment: Statistics Canada CANSIM table 281-0024.This table shows only the direct employment in each industry compared to the full employment impact of either of the two shipbuilding projects. 10

WHERE WILL PEOPLE SPEND

11

POTENTIAL MUNICIPAL TAX BENEFITS

• $13 million in local property taxes each year

• $250 million in local property taxes over the first 19 years

12

SO WE WON, WHAT’S NEXT?

• Build on the marine industry cluster

WHAT IS A CLUSTER?

“A geographic concentration of firms, suppliers, support services, specialized infrastructure, producers of related products and specialized institutions that arise in particular fields in particular locations.”

-Michael Porter

• Invest in the cluster

Specific Industry

Firms

Suppliers

HOW?

13

OTHER GOVERNMENTS ARE INVESTING IN CLUSTERING

• Montreal aerospace cluster support through numerous tax incentives and strategic investments helped to build an industry cluster of 40,000 employees

• Waterloo - $214 million invested by federal/provincial/municipal governments in Research & Technology Park to provide a supportive base for radical, high-impact research

• Alberta ; the government of Alberta has spent over $1 billion on oil sands research and held over nearly $1 billion in bonds for the industry

• Auto industry in Ontario – on average, nearly $500 million of public and private money is invested annually in research and development, infrastructure.

14

Combat Non-Combat No Contract

$5,063,000,000

$1,903,000,000

-$871,000,000

Total Change in Tax Revenue; Combat, Non-Combat and No Contract Scenarios; Nova Scotia, 2012-2030

Source: Conference Board of Canada

15