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TORONTO, ONTARIO--(Marketwire - Feb. 24, 2012) - Small businesses in Canada - the backbone of communities across the country - are positioned to prosper more than ever, according to BMO Economics.

"It was survival of the fittest as the strongest companies weathered the recession, and through the recovery the survivors have become even stronger. This, combined with the fact that all businesses must operate in a 'heightened' climate of productivity enhancements, will lead to increased spending on machinery and equipment," said Doug Porter, Deputy Chief Economist, BMO Capital Markets.

"Upgrading equipment is a step in the right direction, but it's also critical how efficiently businesses use the equipment and labour supply. At the same time, policymakers must do whatever they can to support innovation and competitiveness," added Mr. Porter.

"Further growth in business investment outlays will be critical in this effort. Relatively strong finances and supportive financial conditions should spur such capital spending further in the coming year."

He noted that small business provides both heft and dynamism to the economy. There are more than one million small businesses in Canada accounting for the majority of private enterprises in the country, and small business employment comprises nearly half of the private-sector labour force.

Industries such as construction, retail, professional services and truck transportation have heavy concentrations of small firms, which have experienced a roller coaster of strong growth followed by a significant contraction through the previous recession.

Aside from powerful cyclical forces, small businesses are also facing, and leveraging, important longer-term secular trends driven by demographics and the development of digital technologies. The aging population has provided longer-term growth opportunities for firms providing non-institutional health care, where small businesses account for more than two-thirds of total employment in the industry.

Furthermore, the overwhelming prevalence of the Internet is opening new and exciting avenues for small businesses to advertise, market, and distribute their services and products. There are a growing number of retirees who have shifted to self-employment; the fastest-growing component of the labour force is workers age 55 and older.

Gail Cocker, Senior Vice President, Commercial & Treasury Management, BMO Financial Group, noted that companies from small to large must continue innovating to remain competitive. "We have an attractive marketplace, and it's important to keep that momentum going."

Ms. Cocker added that with challenging times come opportunities. "With the strong dollar and low interest rates, we strongly support those customers who want to take this opportunity to make investments in their operations that will boost productivity. BMO recently announced that it is making $10 billion available to businesses over the next three years; we firmly believe this money will provide small and medium-sized businesses with more certainty of available credit. It's a clear example of our ongoing confidence in them, and in the Canadian economy."