SMEs brace for slowdown.

Thunder Bay is in a state of flux, as the owners of small and medium-sized businesses brace for the impact of a slowing economy.

In the 1970s, the city transitioned from being a prominent player in the delivery of goods to Canada via the port system and rail service to becoming a forestry sector hub for Ontario. Thirty-five years later, a metamorphosis is taking place once again. This adjustment won't be without its challenges, Walter Kuch, partner with Kuch, Stephenson Gibson Malo says. The economy has to be prepared for it.

"We see most of the mills are going to close except for one."

As a designer, he says has to be optimistic about the economic prospects, but "we are feeling the tip of what we believe is going to be bigger problem. It is kind of lurking out there."

With no resolution in sight for the softwood lumber dispute, a high Canadian dollar and skyrocketing energy and per unit wood fibre prices, lumber companies are closing their doors leaving thousands of people out of work. Spin-off businesses including retailers, construction companies and hotels are beginning to feel the pinch, but it is nothing compared to what could happen in two years, Kuch says.

It is a familiar foreboding for him. About 10 years ago, their business survived nicely, supplying the provincial NDP's non-profit housing program. An election later, Bob Rae was out of office and the program was out the door.

"We were a one-legged company doing a ton of work for the government and it was gone overnight," Kuch recalls. "When that one leg dried up it very nearly put us out of business."

After three years of begging the banks and seeking out industrial, commercial and institutional contracts, the partners could breath a little easier. Strategically, they realized depending on one revenue source was a mistake.

"We have a lot more diversity and a lot more legs on the ground than we used to."

Forestry and other companies will have to go through similar growing pains. Relying on a single revenue source is no recipe for survival in today's world.

"We have been on the American teat for so long we don't really have any other markets, and I think people are busy building links, but it is going to take awhile to make those connections."

Contractors like Tom Jones may have to look outside the region or even outside the province to secure new projects.

"We have to leave town," general manager John Jones says.

"What else can you do? There just isn't any work in Thunder Bay. It's is in bad shape right now. There is nothing coming down the pike."

Normally during forestry plant shutdowns there are concrete demolition projects, but forest companies "just don't have any money."

Even if architects or designers have projects it would take at least six months to a year before tenders would be issued, Jones says.

But Thunder Bay isn't going to roll over and die. Projects resulting from years of ongoing discussions with Siemens may signal a new research facility, Kuch says.

This, coupled with Lakehead University's health and biotechnology initiatives along with the new Northern Ontario School of Medicine is bringing a new mentality to the region.

Tourism also carries with it great clout as Thunder Bay offers affordable getaways and a quality of lifestyle that is unique to Northern Ontario. In the coming years those factors will greatly affect people's decision to relocate.

www.thunderbay.ca

By KELLY LOUISEIZE

Northern Ontario Business