Article
Budget Changes Threaten Quebec’s Tech and Media Industry
May 27, 2024 4 Minute Read
The province of Quebec has long been a destination for tech workers.
Montreal placed #12 in CBRE’s 2023 Scoring Tech Talent ranking, having added the third most tech jobs in North America (51,500) between 2017 and 2022. Quebec City, the most affordable tech talent market on the continent, ranked #35, with its tech-based labour pool growing 34% since 2017.
But the province’s tech employment growth could face some challenges, as Quebec’s recently tabled but not yet passed 2024-2025 budget includes proposed cuts to existing labour and tax credits for tech and media companies.
“Tech and media are major drivers of the Quebec economy,” says CBRE Montreal’s Nathan Stattmiller, who specializes in office leasing for tech and media companies. “These cuts could have considerable impacts on the gaming and special effects industry and shift the way these companies do business in Quebec.
“This would have repercussions on the commercial real estate sector and the broader Quebec economy.”
Straining an Ecosystem
One of the proposed changes would affect the amount of refundable tax credits available to multimedia businesses, the firms that create video games, educational software, interactive movies and digital magazines.
The introduction of an exclusion threshold of $18,056 for 2024 would set a minimum limit on the labour costs per eligible employee that companies can claim in tax credits. The intent behind this change is to incentivize the employment of workers with higher wages, in an attempt to attract talent and retain workers in Quebec.
A new non-refundable tax credit would be introduced for the production of multimedia titles, with a larger credit offered to those available in French. However, existing refundable tax credits would be rolled back incrementally over five years.
Another proposed change would introduce a limit on the eligible cost of a contract with a service provider for computer-aided special effects and animation. Only 65% of the cost would be considered to calculate the basic tax credit and the bonus for special effects, reducing the overall amount of credits available to visual effects and animation companies.
Not all companies would be impacted in the same way. Startups and cost-conscious companies, including fast-growing businesses in the gaming and visual effects sectors, could be disproportionately affected. This could lead to layoffs, square footage reductions or even relocations outside the province.
“Quebec remains a highly attractive tech market due to its competitive cost of living, specialized labour pool, educated workforce and high quality of life, which makes it appealing to operate here,” says Stattmiller. “However, it’s no secret that the additional incentives were a nice cherry on top. Removing these could make some companies think twice before moving or expanding their operations in the province, thereby removing some of our competitive advantage.”
Looking beyond the tech sector, this could also pose challenges to an office leasing market that is already coping with record-high vacancy rates. Tech and media make up a large proportion of office users in Quebec, with tech representing 8.3% of Montreal’s total employment and 9.1% of Quebec City’s workforce. Should the proposed legislative changes pass, spillover effects could impact the broader office sector and economy.
“It risks straining an ecosystem that is already challenged following the pandemic,” says Stattmiller. “Quebec already has its hurdles and these new changes could make the barrier of entry too high for some companies to justify operating here.”
Looking Ahead
Although the new budget hasn’t been implemented yet, various organizations have spoken out against the changes.
“We’re hearing whispers through our network that some government positions may soften, however, it’s still too early to tell,” says Stattmiller.
In the meantime, Stattmiller and his team are helping clients prepare the framework for possible next steps by performing viability surveys and labour and location analyses.
“Even the best of intentions can have unexpected consequences,” Stattmiller says. “No one wants to lose workers in any sector of the economy, especially one as vibrant as this. Thankfully, despite these changes, Quebec remains an attractive province for many tech players to do business in.”
Recent Insights
-
Fraser McKenna and his team are working with Beedie, a West Coast residential and commercial developer, to sell industrial condo units at BOLT, its new development in Bolton, ON.
-
The Canadian retail sector faces robust demand, low vacancy rates and limited construction activity, but CBRE’s Alistair Corbett says new developments are about to kick off in Alberta.
-
CBRE Group, Inc. earlier this year combined its project management business with Turner & Townsend, a majority-owned subsidiary that provides program management, cost consultancy and project management services globally.
Stay In The Know
Subscribe today and join hundreds of professionals who get the latest blogs delivered straight to their inbox.