Canadian Budget 2025: Focus on Sovereignty and Innovation

The newly released 2025 Canadian federal budget emphasizes economic sovereignty and domestic innovation, reflecting a significant shift in governmental priorities. With the term “investment” appearing over 800 times and “sovereignty” mentioned 81 times, the focus is clear: prioritizing Canadian firms in federal procurement and support. The budget outlines a total of $585 billion with a projected deficit of $78.3 billion, aiming to reshape how the government interacts with the business community.

Benjamin Bergen, president of the Canadian Council of Innovators (CCI), hailed the budget as a pivotal moment for Canadian innovators. He stated, “Today’s budget represents an important step toward building trust with Canada’s innovators and the broader business community.” He noted that the introduction of the phrase “Buy Canadian” marks a notable departure from previous budgets, indicating a serious commitment to strengthening local industries.

Bergen emphasized that the government must translate this intent into tangible outcomes. During a post-budget debrief with technology leaders, he urged, “How are we making sure that dollars that we’re investing in procurement are actually going to domestic firms?” This crucial question will determine the budget’s legacy for Canadian businesses.

Defining Canadian Sovereignty

The concept of sovereignty has dominated policy discussions in the past year. Daniel Perry, CCI’s director of federal affairs, highlighted the importance of collaboration between Prime Minister Carney and industry leaders. He stated, “It is essential for Prime Minister Carney and his team to work closely with CEOs and industry leaders to shape programs, policy, and procurement strategies that will drive success for Canadian headquartered companies.”

A critical aspect of this dialogue involves defining what constitutes a “Canadian” company. Perry stressed the need for clarity, asserting, “Without a foundation of clarity, we risk deploying these investments that we see in this budget in the same status quo ways.” He cautioned that without a clear definition, funding could inadvertently bolster foreign interests instead of fostering domestic economic growth.

Bergen echoed this sentiment, stating, “True sovereignty requires more than spending. It requires understanding that in the 21st century, economic value is created through the generation and ownership of intangible assets, proprietary datasets, and control of intellectual property.” This clarity will be vital in determining whether Canada can cultivate a robust innovation economy anchored in local ownership.

Turning Investment into Action

The budget also promises significant changes to the Scientific Research and Experimental Development (SR&ED) program. Perry noted that the modernization of the tax credit focuses on “speed, scale, and commercialization.” The refundable tax credit will apply to the first $6 million of eligible spending, an increase from the previous $4.5 million. Additionally, newly eligible Canadian public companies can now participate, further broadening the program’s reach.

Bergen described these reforms as a sign that the government is attentive to the needs of innovators. “The government’s commitment to SR&ED reform demonstrates that they’ve been listening to innovators,” he said. However, Perry cautioned that the success of these initiatives hinges on follow-through, emphasizing, “Announcements don’t make scale. Contracts do.”

The budget allocates $81.8 billion over five years for defense spending, coupled with new authorities for the Canada Infrastructure Bank to invest in digital infrastructure and artificial intelligence. Bergen remarked that “this is Canada’s chance to do defence procurement right,” urging the government to prioritize domestic companies in procurement processes.

Laurent Carbonneau, CCI’s director of policy and research, noted a shift in the government’s approach to national competitiveness. He stated, “The Carney government’s vision from the beginning has been very much that the best thing Canada can do to have a solid footing in dealing with that very difficult relationship [with the U.S.] is to put itself on a stronger economic footing.”

While the budget signals progress, CCI leaders emphasize that the work is far from finished. Bergen highlighted the need for substantive policy shifts to ensure that promises translate into real outcomes. “These must not be symbolic gestures,” he asserted. “We need to make sure that the Canadian companies are front of mind for this government.”

The 2025 Canadian federal budget marks a significant turning point, aiming to foster economic sovereignty and support homegrown innovation. Whether this new approach will yield lasting benefits for Canadian firms remains to be seen, but the commitment to ensuring Canadian companies play a central role is a crucial first step.