It isn’t just households with pent-up savings during the pandemic: businesses are also sitting on a massive cash cushion ready to be unleashed once the world returns to normal. However, the country can’t count on that capital alone to drive the pandemic recovery, according to one Bay Street economist.

Data from CIBC suggests businesses are currently holding onto $100 billion in excess cash. In a television interview, Benjamin Tal, deputy chief economist at CIBC World Markets, said he expects that due to the uncertainty of how that cash will be deployed, business investments will have a subdued impact on the pandemic recovery.

“The question is, we know that outside of residential investment, we have seen a significant decline in all kinds of other investments…” Tal said in an interview. “To what extent this money will be financing the next boom in investment, that’s the big question.”

Adding to the investment uncertainty is how much of the capital on hand is actually debt that would need to be repaid after the pandemic. Businesses accessed roughly $45 billion in credit through the Canada Emergency Business Account (CEBA), taking up nearly half of the total excess cash, according to Tal.

“Therefore, the amount of money sitting really on the sidelines is much less than [$100 billion],” he said, adding that the recovery will largely be driven by the services sector, not the goods segment.

“Another factor: I’m not sure how much of it will go to maintenance as opposed to expanding production capacity. So overall, yes, this money will be spent, but it will not be the same factor when it comes to households spending their money and therefore, the lift to economic growth from investment will be muted relative to the consumer.”

Tax policy should also be part of the equation, Tal explained. U.S. President Joe Biden proposed hiking the corporate tax rate to 28 per cent from 21 per cent. That hike could be good for Canada, Tal argued.

“I think tax policy clearly should be part of it and maybe we will regain our advantage with Biden raising rates over there,” he said.