A Fifth of Canada’s Small Businesses Face Closure: Business Federation

An empty store up for rent is seen in Montreal on June 8, 2020. Paul Chiasson/The Canadian Press

A majority of small businesses in Canada have not rebounded to pre-pandemic levels, a Senate national finance committee heard yesterday.

“Only half of small businesses are back to normal sales from pre-pandemic levels,” testified Dan Kelly, CEO of the Canadian Federation of Independent Business (CFIB), according to Blacklocks Reporter.

“Two thirds of small Canadian firms are still facing additional COVID debt, debt they didn’t have before the pandemic,” said Kelly. “On average that’s now $110,000 in additional debt.”

Ultimately, he said, “Seventeen percent of small businesses—almost one in five—are at risk of permanent closure due to the damage they have taken on over the course of the last couple of years.” Kelly’s assessment was based on a survey of CFIB’s 95,000 members.

The latest Statistics Canada data show there were about 1.2 million small businesses in Canada as of December 2021. With 17 percent at risk of closure, that’s about 204,000 businesses. Statistics Canada also reports that small businesses employ 67 percent of the total private labour force.

Kelly said that bankruptcy statistics may not reflect the true picture of business failures. Many just wind down and close up shop as business declines, before it reaches the point of bankruptcy.

CFIB also reported last week that small business confidence had reached one of its lowest levels ever heading into the holidays. CFIB measures confidence with its Business Barometer, a survey of its members as to whether they expect their business performance to be stronger or weaker in the coming months.

“The situation remains sobering for many small businesses,“ said Simon Gaudreault, Chief Economist and Vice-President of Research at CFIB in the report. ”High costs of doing business, a lack of staffing and ongoing interest rate hikes make it harder for them to know for sure where their business is headed.”

He continued, “The short-term and 12-month outlooks for retail, in particular, have been quite low for the past several months, which is not what we expect to see in the lead-up to the holiday shopping season.”