Canada’s small businesses in crisis

by Maj (ret'd) CORNELIU. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East October is Small Business Month, and the challenges they face are numerous, including lockdown-era loans coming due, inflation, persistently high interest rates and labour shortages. Small and medium sized businesses are significant contributors to the Canadian economy. For context, small businesses made up 98.0% of all employer businesses in Canada in 2020, employing 9.7 million individuals in Canada - approximately 64% of the total labour force. By comparison, medium-sized businesses employed 3.2 million individuals (21.2% of the labour force) and large businesses employed 2.3 million individuals (14.8% of the labour force). If we look at the Province of Ontario, the most populous province of Canada, we see that small-business owners are struggling in a mental-health “echo pandemic” and lack the resources to deal with employee and self-burnout, according to a report from the Ontario Chamber of Commerce (OCC). Certainly, the prospective of an economic slow down or a forthcoming recession is not helping small business stay afloat. The recent succession of prime rate increases by the Bank of Canada is not helping either. With over 494,000 small businesses in Ontario, the sector employs more than four million people, or 71 per cent of the private-sector work force in the province, the OCC says. According to the OCC, which advocates on behalf of approximately 60,000 businesses across the province, 45 per cent of small-business owners said they felt “overwhelming stress” dealing with the effects of the COVID-19 pandemic, including inflation, supply chain issues and employee retention. Two-thirds of small-business owners also said they were closer to burning out after two years of COVID-19-related stress, according to a survey conducted last year. Financial challenges continue to be top-of-mind for business owners in Canada. More than half of small business owners (55%) say they are being confronted with increased materials costs due to inflationary pressures or continually rising interest rates. This figure is up seven points from last year, when just under half (48%) of business owners said they felt pressure due to these increased costs. Ontario business owners are the most likely to say they anticipate financial difficulties in the year ahead (15%), compared with those in Saskatchewan and Manitoba who are least likely to anticipate financial difficulties (5%). An important component of small businesses in Canada is represented by the restaurant industry. The foodservice industry is an economic engine. Restaurants across the country generate $100 billion in sales (accounting for 4% of Canada’s GDP), are the fourth largest employer in Canada, employing 1 million people, and serve 22 million customers every day. The impact of the pandemic, 3 years of volatility and steep inflation have taken a toll on the future success of restaurants. According to a survey conducted by Restaurants Canada, 84% of foodservice companies reported lower profits in 2023 than in 2019, and over half of all foodservice companies are currently operating at a loss or just breaking even compared to 12% pre-pandemic. This decline in profitability is not a reflection of the quality of service or the ability of restaurants to provide a good meal; rather, it is a result of the challenging economic environment and reduced discretionary spending among Canadians. The reality is that operating a restaurant in Canada has never been more challenging than it is today, and hidden costs, along with broader economic challenges, are killing businesses. As we head into the winter months, which historically see lower guest counts as Canadians choose quiet nights at home, over meals in a restaurant, these challenges will continue to compound. With heavy debt-loads hanging over 66% of foodservice businesses, high inflation and skyrocketing operational costs are taking their toll. To ensure the survival and success of the foodservice industry and small businesses in general, it is essential that government and policymakers take concrete steps to support restaurant and small businesses profitability. Lowering the small business tax rate from 9% to 8% would provide much-needed relief to restaurant operators, allowing them to pay off debt, invest in energy-saving equipment, and expand employee benefits. Maintaining a cap on the alcohol excise tax escalator and allowing restaurant meals to be fully deductible business expenses would further incentivize growth and investment in the industry. Furthermore, addressing labor shortages is crucial for the long-term viability of restaurants. What small business and the restaurant industry need is a dedicated stream in the immigration system, especially for the restaurant industry. Current immigration streams have proven to be a poor fit for the restaurant industry and have done little to prevent massive labour shortages from wreaking havoc on businesses. The importance of restaurants extends beyond their economic contributions. They serve as gathering places, where people come together to share meals, create memories, and build social connections. Independent restaurants are an integral part of the social fabric of our communities, and their closure would result in the loss of vibrant meeting spaces and cultural hubs. The industry is the top provider of first-time jobs in Canada, with one in five Canadians between the ages of 15 and 24 currently employed in a restaurant. They are also the first employer for half of all newcomers to the country. When restaurants close in masse, it represents more than economic hardship: losing restaurants means losing jobs, community gathering points, and the places that bring so many newcomers and young Canadians to the workforce. Helping restaurants regain their balance will bring vibrancy back to the industry and keep more doors open this winter. Let us hope governments are listening and acting accordingly. It is time to pay more attention to the needs of Canadians and curtail useless, non- accountable, generous foreign aid. What do you think?