The Calgary Chamber of Commerce is warning that Alberta separation could shrink the province’s economy, reduce employment and leave a future government with a $9-billion fiscal shortfall. The chamber released an analysis of trade, labour and public finances alongside an open letter signed by Alberta business leaders urging the province to remain in Canada.

University of Calgary economist Trevor Tombe prepared the analysis for the chamber. It estimates that trade costs could increase by five to eight per cent, job losses could reach 175,000 and the annual economic impact could reach $62 billion. The report also estimates that separation would leave Alberta with a $9-billion gap in its public finances.

The letter says: “We must remain at the table and prioritize relationships, opportunities and stability that have helped make this province and this country prosperous.” It also states: “Alberta can be proud of Its identity while remaining confident in its future within Canada.”

The signatories include the heads of AltaGas, ATCO, AltaLink, Capital Power, Keyera, BHE Transmission and Chirp Foods Inc., described as Canada’s largest McDonald’s franchise business. Tourism Calgary and Calgary Economic Development have also signed, along with a former chief executive officer of Trans Mountain Corp. The chamber said it expects more business leaders to join.

Albertans are due to vote in three weeks on 10 referendum questions. One asks whether the province should remain in Canada or begin the process of holding another referendum on separation.

Tombe told reporters that the economic figures have direct implications for people’s purchasing power. “When you hear something like GDP contracting, it seems like an abstract statistical notion, but this translates directly into real incomes and wages. How much goods and services can you afford to purchase with an hour of work?” he said.

The chamber’s report draws on Tombe’s assessment of trade links and potential costs from a new border between Alberta and the rest of Canada. In an interview with CTV News Edmonton’s Alberta Primetime host Michael Higgins, Tombe said a report he helped produce for the University of Calgary’s School of Public Policy for the provincial government considered a wider range of scenarios. He said that breadth made it harder to settle on a more specific estimate of the economic effects.

The School of Public Policy report was modelled primarily by professor Kent Fellows, Tombe said. He described the chamber’s assessment as a sharper estimate, putting the possible contraction of Alberta’s economy at roughly 10 per cent, plus or minus a few percentage points. He said other work on separation had been produced by the Canada West Foundation and the C.D. Howe Institute, and that reports can differ because authors use different economic models and assumptions.

Tombe said Alberta’s trade exposure is broader than the widely discussed oil and gas exports to the United States. He said less than half the income generated by exports comes from those oil and gas shipments to the U.S. Alberta earns 55 cents of every dollar from exports, including trade with other provinces, and one in three provincial jobs depends on exports. In Calgary, he said, the share of employment tied to exports is a little over 36 per cent.

He said even modest increases in trade friction or costs could affect productivity, investment, employment and future wage growth. Trade between Alberta and the rest of Canada would not stop, he said, but regulatory differences between a separate Alberta and the rest of the country could add costs through standards, certifications and inspections.

Tombe cited the United Kingdom’s departure from the European Union as a comparison. Even though U.K. firms can still access Canada, the EU and other countries largely tariff-free as before, regulations and inspections have added business costs, he said. Tombe estimated the relevant increase for Alberta could be five to eight per cent, a level that could reduce trade and, in turn, productivity and growth because of the province’s reliance on trade.

Chamber president and CEO Deborah Yedlin compared separation to scoring against Alberta itself to make a point. “I grew up with this notion of the Alberta advantage - no sales tax, low taxes, good education, health care, social services. All of that would disappear and we would not be able to sustain that level of support for Albertans,” she told reporters.

Yedlin said a weaker economy would reduce investment and tax revenue, making it harder to fund public services unless the province changed how it operates. “That, in turn, turns into a negative feedback loop, and you don’t get the investment, you don’t generate the tax revenue, you can’t provide the services unless you change how you operate, and that’s just not something anybody really wants to see.”

Tombe said a smaller economy would mean lower incomes and less revenue because much of government income comes from personal and corporate taxes and consumption. The chamber analysis estimates that closing the $9-billion fiscal gap could require a 13 per cent sales tax, a 10 per cent increase in the corporate income tax, or a 40 per cent cut to transfers that businesses and individuals now receive, including the Canada Child Benefit and old age security.

In the CTV interview, Tombe gave different figures for two of those possible tax changes. He said a broad-based sales tax equivalent to about eight per cent could cover the deficit, or the corporate tax rate could rise by about 10 percentage points. He said those changes would erase Alberta’s advantage in taxation, productivity and economic strength. The CTV account characterized the interview as edited for length and clarity.

Tombe also said a separate province would have the costs of establishing and operating the functions of a state. In his view, the combination of lower revenue and those expenses could turn what some people see as a fiscal windfall from no longer paying federal taxes into a burden.

Yedlin said the referendum arrives as Alberta faces significant opportunities. She pointed to global demand for stable energy supplies amid wars in the Middle East and Russia, as well as policy changes by the federal government under Prime Minister Mark Carney that businesses have embraced and an eagerness to build energy infrastructure.

Some voters may support a separation referendum to send a message after 10 years of former prime minister Justin Trudeau’s less oilpatch-friendly approach, Yedlin said. “It’s easy to look in the rear-view mirror and it’s easy to be aggrieved and to focus on that. It’s much harder to be an optimist, but we’re at a point in time where we need to have that optimism. “This is a different set of circumstances, a different environment for Alberta, for the energy sector and we do need to look forward.”

Yedlin said some business leaders may have been reluctant to enter the debate because they did not want to alienate employees in the field who sympathize with separatism. She said organizations can state their positions while respecting employees’ choices. “The reality is, though, that as an entity, you can say this is what you stand for. And at the same time, you respect the right of your employees to vote according to what they feel is important to them,” she said. “Ultimately, where you need to be is on the right side of history.”

Tombe also challenged a budget and costing plan recently released by the pro-independence Alberta Transition Council. The council projected about $5 billion in one-time expenses and annual surpluses of $20 billion to $30 billion thereafter. Tombe said its analysis assumes a separate Alberta would take on no federal debt, which he called unrealistic, and does not account for the interest costs Alberta would face if it took on a share of the national debt.

He said the council also removes federal transfers such as old age security from the provincial budget, raising its projected surplus, then groups the benefits with the pension plan. That would mean higher contributions from workers, he said, a cost the council’s reports do not quantify. Tombe said the plan relies on optimistic assumptions and departs from fiscal reality, particularly on federal debt.

Tombe told CTV that the investment outlook is uncertain because no province has left Confederation. He said estimates of the U.K.’s experience after leaving the EU put investment 12 to 18 per cent below where it otherwise would have been. If Alberta experienced a decline of the same size, which he described as an optimistic scenario for the province, investment that now occurs could fall by about $10 billion to $15 billion per year. He said lower investment would leave workers with fewer machines, equipment and technologies, weighing on economic growth.

Based on reporting by CTV News Edmonton and Global News Edmonton.