As public service cuts loom, local Ottawa agency eyes growing defence industry

OTTAWA — With the prospect of public service cuts looming over the capital, an Ottawa economic development agency is making a pitch for federal help to grow out the local defence industry and turn it into an “innovation hub.”

Invest Ottawa, a not-for-profit local economic development group, is asking the federal government to grant the National Capital Region a “formal designation” as a “national defence innovation hub” and to “fully leverage and invest” in the local defence industry.

In a document submitted to the House of Commons finance committee, which is studying requests ahead of the Nov. 4 budget, Invest Ottawa called for funds that would create new “high-value jobs” in the Ottawa and Gatineau region and help firms develop new products for export.

A separate submission by Invest Ottawa to the Department of Finance specifically asks for funds for a secure research site — what it calls a “Sensitive Compartmented Information Facility” — where companies could collaborate with the military on classified matters.

It also calls for federal money to expand Invest Ottawa’s Area X.O, a research and development complex in rural Ottawa for emerging technology.

The organization is also asking Ottawa to allocate a set share of new national defence hires to the capital region.

Sonya Shorey, CEO of Invest Ottawa, said her organization sees a chance to counteract anticipated public sector job losses and renew the local economy.

“The opportunity in defence and security is immense,” she said.

“We’re seeing it as really an opportunity to almost counterbalance and counteract some of the losses in that public sector. Hopefully, there will also be up-skilling and re-skilling. We’re definitely championing talent strategy as part of our overall … capital region strategy with respect to the defence sector.”

The pitch comes as the federal government looks to ramp up defence spending over the coming years to meet steep NATO spending targets.

The federal government says it intends to boost defence spending to the equivalent of two per cent of GDP, and eventually to five per cent by 2035 — an increase of tens of billions per year.

Ottawa hosts some 330 defence-related companies and is home to the Department of National Defence headquarters, Defence Research and Development Canada and four NATO “innovation accelerator” test centres.

Shorey said she has been working with Ottawa Mayor Mark Sutcliffe on a National Capital Region defence sector strategy. That strategy, set to be released at end of October, will come with specific targets for jobs and investment.

The federal government is drafting a national industrial policy to boost the domestic defence industrial base — expected to come out sometime this fall — and stand up a new defence procurement agency to overhaul how Ottawa makes military purchases.

Ottawa and Gatineau also represent a political stronghold for the Liberals and area MPs include Prime Minister Mark Carney, Defence Minister David McGuinty and Jenna Sudds, parliamentary secretary for defence procurement.

McGuinty spoke at an event last week at Area X.O, where he said the government has engaged with hundreds of companies as it forges its new industrial strategy.

In a speech shared with The Canadian Press that Shorey delivered to the National Capital Region’s Liberal caucus on Aug. 29, the Invest Ottawa CEO told MPs it’s possible to achieve “disproportionate economic impact” through “disproportionate investment.”

Her organization has not said yet exactly how much federal funding it’s seeking to boost the local defence sector.

Experts said politics will play a role in federal government decision-making as it divides up the defence pie across the country.

Evert Lindquist, a professor at the school of public administration at the University of Victoria, said the government could become inundated with funding requests as other cities see opportunities.

“I think every municipality and region ought to be thinking along these lines,” he said.

“There’s a big (national) grid all of a sudden, and the government has to deal with the optics of only investing in Ottawa. The defence industry, broadly speaking, will have to think about how they’re conveying this to the government as a whole to help it deal with the politics in making such big investments.”

He said government decision-making can also become overloaded as it seeks to get its fiscal trajectory under control.

Christian Leuprecht, a professor at Royal Military College of Canada and Queen’s University, said it’s “not clear” that laid-off public servants could find work in the defence sector, but “clearly, there’s an opportunity.”

“Previously in this country, people would sort of frown on co-operating with defence, so that Ottawa would see this as an opportunity is also an indication of a broader swing in the public mood,” he said.

“I would hope that the government would consider a more co-ordinated approach to the role of municipalities and what exactly we might need from them.”

The Ottawa region isn’t the only one looking for a piece of the federal government’s defence spending boom.

Calgary Economic Development is asking for $3 million for a defence commercialization hub, while the organization representing Quebec’s chambers of commerce is calling for a new forgivable loan program dedicated to small and medium-sized defence-sector enterprises.

Top Canadian research universities are seeking to forge early ties with a promised new federal defence research institute: BOREALIS, the Bureau of Research, Engineering, and Advanced Leadership in Science. The institute, which Carney pitched during the election campaign, is meant to advance research in artificial intelligence, quantum computing and cybersecurity.

Many other groups are proposing federal investments in “dual-use” projects that could be applied in other areas as well.

The Federation of Canadian Municipalities said it wants to ensure that Arctic and northern defence funding also bolsters municipal and community infrastructure by improving ports, roads, airports, water and wastewater systems.

This report by The Canadian Press was first published Sept. 30, 2025.

Kyle Duggan, The Canadian Press