Defence Spending: A Multi-Year Boost to Canada's Construction Sector

At the recent NATO summit, Canadian Prime Minister Mark Carney affirmed Canada's commitment to reaching NATO's new defence spending target of 5% of GDP by 2035. These developments will drive significant demand for construction services in Canada.

Key highlights include the following:
-- Considerable growth in annual defence spending presents multi-year opportunities for Canada's construction sector.
-- The drastic increase in defence spending could present challenges including supply chain bottlenecks, resource constraints, and labour challenges.
-- We expect a positive effect on the credit risk profiles of construction firms with a history of working with Defence Construction Canada and those that successfully manage the contract and operational risk in this evolving landscape.

"We expect those construction companies with strong execution capabilities, interprovincial presence, and a history of working for Defence Construction Canada will see long-term benefits from the considerably higher defence spending levels," said Margaret Rabba, Vice President, Corporate Ratings. "This growth, however, will not be easy to absorb for a sector currently managing an evolving geopolitical landscape, increased costs, and skilled labour challenges."