Six straight quarters of decline signal weakening small business confidence nationwide
Canada is facing a sustained decline in entrepreneurship, with more businesses shutting down than launching for six consecutive quarters, according to new research from the Canadian Federation of Independent Business.
The report describes the trend as an “entrepreneurial drought,” marking a sharp shift from historical patterns where new business formation typically exceeded closures.
Data from the study shows that this reversal has been underway since early 2024, with the imbalance persisting through 2025. At its peak, the exit rate reached 5.6% in the second quarter of 2025, while the rate of new business creation fell to 4.8% by the end of the year—among the weakest levels outside the pandemic period.
The findings point to a broader erosion in confidence among small business owners. More than half (55%) say they would not recommend starting a business in the current environment, underscoring growing concern about the viability of entrepreneurship in Canada.
CFIB attributes the downturn to a combination of persistent cost pressures, regulatory burden, labour shortages, and ongoing economic uncertainty—all of which are discouraging new entrants while pushing existing operators to close.
"Small businesses have watched governments hand out billions of dollars to multinationals while ignoring the realities on Main Street. Governments need to wake up. If we want a more productive and competitive economy tomorrow, we need more small businesses today," said Michelle Auger, CFIB director of trade and marketplace competitiveness.
Beyond startup and closure rates, the report highlights dissatisfaction with government support. Two-thirds of small businesses say they feel unsupported at the provincial level, while just 3% strongly believe their government has a clear strategy for entrepreneurship. Confidence in federal leadership is also low, with 73% expressing doubt.
The organization says these conditions are creating structural barriers to business formation, with tax burdens, payroll costs, and compliance requirements making it harder to launch and sustain operations.
"Canada's economic foundation is crumbling. Governments need to stop just papering over the cracks and really refocus efforts on policies that improve the small business environment," said Brianna Solberg, CFIB's director for the Prairies and the North. "We cannot afford to regulate ambition out of our economy. When more than half of current small business owners are telling you they wouldn't recommend starting a business, it's time to listen."
While the concept of declining business formation has been developing over decades, CFIB notes that this is the first prolonged period in which closures have consistently outpaced openings.
The report is the first installment in a two-part series examining Canada’s shrinking business landscape, with a follow-up set to outline policy recommendations aimed at reversing the trend.
Without meaningful changes, CFIB warns the country risks weakening its small business sector—a key driver of economic growth, innovation, and employment.
