Why Growth Matters: Chapter 4 - Growing British Columbia’s Local Economy

We’ve talked about what economic growth is and why it matters, but how do we actually achieve it? 

To understand the mechanics of economic growth, it helps to think of the economy as three interconnected parts. In a way, each part functions like a mini-economy, with its own drivers and barriers to growth. By looking at these areas, we can better identify where our efforts should be focused. 

Let’s explore each part and what it takes to support their growth, starting with local-serving businesses. 

The Local-Serving Economy 

This part of the economy is made up of businesses that provide products and services to the people of British Columbia. These are your neighbourhood shops, hair salons, restaurants, grocery stores, fitness studios, and countless other small and medium-sized enterprises that keep our communities running. 

So, how do these businesses grow? 

Let’s use a local hair salon as an example. Suppose the salon decides to invest more in marketing to attract new customers. That might boost its revenue, but only if it draws clients away from a competing salon or creates a new product or service that increases more demand for these services. In many cases, across the industry, total demand hasn’t increased; it’s simply been redistributed. 

Even if a new salon opens up, that doesn’t automatically translate to economic growth. Improvements translating to economic growth can occur if local businesses adopt productivity improvements in local-serving sectors. For example, if the salon uses a new digital scheduling service that enables more haircuts per day that could raise output or value without just relying on population or income growth. 

Aside from the productivity adoptions, economic growth in local-serving businesses happens when the size of the pie gets bigger. And that can happen in two main ways: 

1. Rising Disposable Income 

Disposable income is what’s left after people pay for necessities like rent or mortgage payments, groceries, and transportation. When disposable incomes rise, people are more likely to spend on services like haircuts, massages, dining out, or home renovations. 

When incomes shrink—such as during an economic downturn—people start cutting back. They delay hair appointments or eat out less often. Local businesses feel the impact quickly. 

So, what leads to rising disposable income? That’s right, economic growth! As people earn more, gain better job opportunities, and feel more secure in their financial futures, they spend more freely. 

2. Population Growth 

More people means more customers. It’s that simple. A growing population fuels demand across the board, from groceries to gyms to childcare, and helps local-serving businesses thrive. 

Of course, population growth can be a contentious issue. Some argue it strains infrastructure or affects affordability.  

Population growth brings new talent, ideas, and energy into our communities. It supports demand for services, drives job creation, and makes room for innovation. At the same time, there are limitations to the amount (and composition) of a growing population that a city or region can absorb. There are also key differences in how the composition of population growth leads to a demand for local services. Babies do not generally require services from a salon, while new seniors may require more health care services.  The bottom line is that population growth leads to higher demand but there are limits to how much an economy can absorb.  

The Business-to-Business Economy 

Alongside local-serving firms, another key segment of our economy is the business-to-business sector. These are the companies that provide goods and services to other businesses operating across British Columbia. This could include commercial landlords, IT service providers, marketing agencies, suppliers, equipment rental firms, or industrial service companies. 

Let’s consider the example of a commercial landlord who rents office space to local companies. If that landlord lowers rents or markets their space more aggressively, they might attract more tenants, but usually at the expense of another landlord. 

For the commercial leasing sector as a whole to grow, demand for office space needs to increase. And that only happens when new businesses are created or existing businesses expand and can hire more people, take on more contracts, or open new divisions. 

That’s the defining trait of the business-to-business economy: it grows when other companies grow. A new IT firm can’t scale if its clients aren’t growing too. A marketing agency doesn’t thrive unless the businesses it serves are expanding and investing. 

But business-to-business companies are not just passive players. They often drive innovation and efficiency across the economy, think about advances in IT, logistics, or fintech that allow entire sectors to become more productive. Many of these firms also export their expertise and services, which means they play a direct role in bringing outside dollars into B.C. as well. 

The Export-Oriented Economy 

Now that we’ve looked at the local-serving and business-to-business parts of the economy, it’s time to focus on export-oriented industries, which act as a powerful engine of economic growth. 

Export-oriented businesses are those that sell goods or services to customers outside of British Columbia, bringing in new dollars and injecting them into the local economy. These are exporters, technology companies, tourism operators, international education providers, resource firms, and others who interact with the broader global market. 

Terms of trade are important for export-oriented economy. If export prices fall (even if volumes grow), companies will have fewer profits to invest in back in the form of wages for workers.  

These businesses generate income for the province. And they support the growth of local-serving and business-to-business companies by creating demand for local services, suppliers, and employees. 

Here’s what export-oriented companies typically have in common: 

1. They Sell Beyond Our Borders 

Unlike a local café or hair salon, these businesses don’t need to be physically located near their customers. That gives them flexibility but also means they can relocate if other jurisdictions offer better conditions. 

That’s why a competitive business environment matters. If it becomes easier to operate elsewhere, they might take their jobs, investment, and spending with them. 

2. They Sell Services, Not Just Products 

Many of B.C.’s most dynamic export-oriented companies operate in knowledge-based service industries such as technology, professional services, education, tourism, and digital media. These sectors depend on highly skilled talent, create quality jobs, and strengthen the province’s ability to compete in a knowledge economy. 

3. They Compete Globally 

Export-oriented companies don’t just compete with each other; they compete with businesses around the world. B.C. lumber or copper exports are competing for global customers as is our tourism sector for dollars to be spent here instead of say California.  

In British Columbia one of the most important export-oriented industries is the natural resource sector. From B.C.'s foundation to the present day, they have remained a highly productive sector that generates significant value and forms a large part of our export base.  

B.C.’s role as a gateway province is a key reason why a thriving export-oriented economy is a crucial ingredient to our economic growth. Through the Port of Vancouver, Canada’s largest port, we connect Canada to the Asia-Pacific region, giving local companies access to some of the fastest-growing markets in the world. 

But we’re not the only gateway in the northwest pacific region which is why getting the policy mix right — on taxation, regulation, infrastructure, and talent — is critical to helping these companies thrive. 

Why it matters 

Export-oriented industries are like the gas tank of British Columbia’s economy. Without them, the other parts can’t grow. Local-serving and business-to-business companies can only grow sustainably when there’s more money circulating through the economy, and that starts with export-oriented businesses bringing money in from outside. 

Economic growth means creating the conditions for businesses to thrive and invest locally. When that happens, we see higher-paying jobs, more opportunities, and the ability to compete and trade successfully at the international level.  

By understanding the different parts of our economy and the unique role each plays, we can better shape policy and investment to support real, sustained growth in British Columbia. 

Let’s grow smart. Let’s grow together. 

Thanks for reading. If you found this helpful, consider sharing it so we can all better understand the engine behind B.C.’s prosperity. Stay tuned for Chapter 5. 

Learn more about the Agenda for Economic Growth.

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