Canada is struggling to attract productive investment, warns the MEI in a new Economic Note

• As of 2025, the accumulated stock of Canadian investment abroad exceeds foreign investment in Canada by $828.4 billion

Montreal, June 4, 2026 – Canada is in an investment crisis, and Canadian workers are bearing the brunt. This is the clear-cut conclusion of an Economic Note released by the MEI this morning.

“Across a range of indicators, we see that Canada is struggling to attract the kind of investment we need to raise our standard of living,” says Charles Lammam, a senior fellow at the MEI and author of the report. “When our businesses invest less in machinery, equipment, technology, and innovation than their peers, workers end up with fewer and older tools, productivity stagnates, and wages fall behind.”

A growing stock of capital… abroad

In 2014, the accumulated stock of investments held by Canadians abroad were worth $100.5 billion more than those held in Canada by foreign interests. At the time, this represented approximately 14 per cent of the total value of foreign investments in Canada.

By 2025, this gap had ballooned to $828.4 billion – an amount equivalent to over half of all foreign investment in Canada.

The MEI researcher explains that, while some may view this as a positive sign with respect to the competitiveness of Canadian firms and their ability to allocate funds to where the return on investment is highest, we should also be concerned that the best returns appear increasingly to be found outside Canada.

Between 2014 and 2024, net annual outflows of foreign direct investment averaged 4.1 per cent of GDP, compared against average inflows of just 2.4 per cent.

In 2025, investment inflow exceeded outflow for the first time in a decade. The researcher notes this was driven by a sharp drop in Canadian investment abroad, rather than a surge in foreign confidence.

Dwindling and depreciating equipment affecting productivity

A crucial factor affecting productivity is the quantity and quality of the machinery and equipment that companies make available to workers, the researcher explains.

“Whether it’s a tractor, an assembly line, or a computer server, high-quality equipment makes workers more productive, which in turn leads to higher wages,” adds Mr. Lammam. “Unfortunately, although there are more Canadian workers today than there were ten years ago, the supply of tools available to accomplish this work is dwindling.”

Between 2014 and 2024, the inflation-adjusted total value of business equipment and machinery fell from $418.8 billion to $404.8 billion – a decrease of 3.3 per cent. And that’s despite Canada’s population growing by 16.4 per cent.

This downward trend can also be observed in Canadian companies’ levels of investment per employee. Starting from $20,900 per worker in 2014, this amount had fallen to $17,600 per worker in 2024. After adjusting for inflation, this represents a drop of 16 per cent.

Over the same period, investment per worker rose by 9 per cent in the Eurozone, by 12 per cent in OECD countries overall, and by 26 per cent in the United States.

“While our peers are steadily building productive capacity and raising living standards, Canada is moving in the opposite direction — and without a course correction, the gap will only widen,” explains Mr. Lammam.

The crisis is also affecting entrepreneurs

The investment crisis is not limited just to large companies; it is also afflicting the entrepreneurial sector.

In 2016, nearly 75 per cent of Canadian company founders who raised more than $1 million in funding were based in Canada, compared with just over 19 per cent in the United States. By 2024, this situation had reversed, with nearly 48 per cent of these founders based in the United States, and only 32 per cent still in Canada.

“Making Canada’s tax regime more competitive, easing the regulatory burden, and encouraging greater competition are all concrete steps that would make Canada a more attractive destination for the investment our workers and economy need,” concludes Mr. Lammam.

You can read the MEI Economic Note by clicking here.

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The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.

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