The hangover from the 1995 sovereignty referendum was not pretty for Montreal. Half a year after a vote that brought Canada to within a sliver of possible breakup, Quebec’s biggest city was left badly shredded.
Its 11% unemployment rate was the highest in urban North America. Residential real estate prices were falling. The vacancy rate for downtown office towers topped 20%. Companies like Canadian Pacific Railway Ltd. continued their slow head-office exodus. One Toronto property broker trying to drum up business ran ads in Montreal newspapers that read: “When the road leads you away from Montreal to Toronto, we’ll be at the other end to make you feel right at home.”
There were larger pan-Canadian consequences too, of course. Amid the constitutional crisis, lenders demanded higher interest rates to hold Canada’s debt. That November the dollar fell a cent and a half as post-referendum optimism vanished amid a realization that Canada’s unity problem remained unsolved.
Today, nine years of Liberal Party rule have restored a certain level of stability to the city and to the province as the federalist party wooed private enterprise and buried unity disagreements with Ottawa. But as Quebecers get set to vote again Sept. 4, the corporate world is bracing for change.
“It’s the first time in my life that I sense from the business community a concern this large about the result of an election and the aftermath,” said Yves-Thomas Dorval, head of the Conseil du Patronat, Quebec’s largest business lobby. “There is a lot of worry that the climate for reinvestment won’t be the same.”
Association representatives like Mr. Dorval, 55, are non-partisan. They can’t take a position for or against a specific political party.
But other business leaders are articulating privately what trade groups won’t — that the election of the sovereigntist Parti Québécois would bring political instability at the very time the world economy is slowing and when Quebec and Canada can least afford it.
A PQ victory in 2012 probably wouldn’t lead to the kind of mass corporate decamping that occurred in the late 1970s after then PQ premier René Lévesque took power, experts say. A more likely scenario would see companies, especially global multinationals with operations in several countries, maintain their presence in Quebec but reduce their investment.
Says Mr. Dorval: “You won’t have the desire to invest in an unstable place. That’s the reality.”
The PQ is leading in the latest Léger Marketing poll with 33% of voting intentions, five percentage points ahead of the Liberals and six points clear of François Legault’s upstart Coalition Avenir Québec. From the moment it takes office, the sovereigntist party is vowing to repatriate to Quebec a series of federally controlled powers over things like employment insurance. It is counting on fights. The thinking is that every time Ottawa says no strengthens the argument for separation.

“Quebecers will judge for themselves Ottawa’s response to our demands,” said PQ finance critic Nicolas Marceau, an economist who teaches at the Université du Québec à Montréal.
The party is also the most interventionist of the three. It would mandate provincial pension fund Caisse de dépôt et placement du Québec to protect Quebec companies from takeovers, politicizing an institution that has remained staunchly independent under chief executive Michael Sabia.
“We’re not talking about the PQ putting its hands in the Caisse. That’s out of the question,” Mr. Marceau said. “There has to be a distance between the government and the Caisse that lets the Caisse take its decisions based on business considerations. But at the same time, we can give it certain orientations to favour economic decisions which we think would be completely legitimate.”
How seriously Premier Jean Charest’s Liberals are taking the threat of a PQ government was made abundantly clear before the campaign started.
Raymond Bachand, the finance minister, uncharacteristically waded into the private markets by vowing to use all means necessary to block a takeover by U.S. home improvement retailer Lowe’s Cos. of local champion Rona Inc. Many observers believe Mr. Bachand’s move was pure political strategy — a way for the Liberals to connect with Quebecers who are instinctively nationalist and claim some of that ground as their own.
It remains to be seen whether the Liberals would maintain that interventionist stance if returned to power. But one thing is certain: Their opponents are even bigger meddlers, vowing to shield Quebec’s corporate jewels like Astral Media Inc. from being bought and the resulting head-office loss than might entail.

That’s great for all the local suppliers and lawyers and accountants whose livelihood feeds from the money flowing out from corporate Quebec’s headquarters. But it’s a bad outlook for investors looking to make money from a change of control.
“As soon as you start intervening in the fluidity of the market, there is a discount” that gets applied on the company being traded, said Adrien Pouliot, president of Montreal investment firm Draco Capital. “There is a general chill.”
Quebecers have a higher tolerance for government intervention than other Canadians, Mr. Pouliot says. He gives the example of the Quebec Stock Savings Plan, a scheme created by former PQ premier Jacques Parizeau that offered investors generous tax breaks if they put money in new public share offerings for Quebec-based companies. He benefitted from the plan as his company was able to raise more money than it otherwise would have.
“The government in Quebec is so involved in the economy that eventually almost everybody gets something,” Mr. Pouliot said. “It’s a system that’s very difficult to break.”
Quebec’s small and medium-sized businesses, which make up 50% of gross domestic product and represent the heart of many communities, are equally apprehensive about the future. Dealing with an 8% tax on profits, double the rest of Canada, and payroll taxes that are 45% higher on average than in other provinces, their hurdles to expansion are immense.
“[We] don’t have a climate where you’re encouraging people to grow their business,” said Martine Hébert of the Canadian Federation of Independent Business. “I go see members in Quebec. They’re telling me ‘I made the choice to stay small because the more I grow, the more problems I get.’ ”
Using the Caisse to shield Quebec companies is a bad strategy, says Martin Coiteux, an economist at Montreal’s HEC business school. First, it presumes that a foreign takeover is automatically a bad thing when in fact a new owner might innovate and create jobs. Second, it’s using pensioner money, not public money, to pursue the government’s agenda.
“It’s like we’re back 20, 30, maybe 40 years ago,” Mr. Coiteux said in an interview. “It projects to the outer world the image of a Quebec which is resolutely looking at its own past.”
There was a time when the Quebec government used the Caisse more actively. If that kind of economic nationalism had produced clear improvements in the lives of ordinary Quebecers, it might be worth pursuing. Trouble is, Mr. Coiteux says, it hasn’t.
“What happened is that the gap between the richest province and our own economy has increased. And provinces such as New Brunswick are catching up. So something is going on. And nobody is really questioning the overall strategy. [It’s] more economic nationalism for no other purpose than to perpetuate a winning speech at election time.”
In theory, the average Quebecer wouldn’t get huffy in the least about the PQ’s plan to repatriate employment insurance. And the party still might find it a tough slog to build support for outright separation.
But the mood among the Quebec electorate now is unpredictable, Mr. Coiteux says. It can get massively behind a cause, as the NDP’s crushing victory in Quebec and this past spring’s student protests demonstrated. It also has little love for the Harper Conservatives.
The argument is that anything can happen in these volatile conditions.
“Given the polls that we’ve seen so far, I don’t think that anybody is really betting on the re-election of the Liberals,” Mr. Coiteux said. “[Quebecers] are dividing their votes. They’re splitting their votes across various parties. And the PQ might strike a win just because of the divisions between the others.”