Canada's businesses plan to hire less, raise prices

Costs are rising and it means lower levels of investment and constrained expansion plans

Canada's businesses plan to hire less, raise prices
Steve Randall

Canada’s businesses can only go so far in absorbing the rising costs of doing business, and that’s bad news for consumers.

Business leaders’ sentiment has been weakened as they battle multiple challenges – inflation, interest rates, material and labour costs – and the impact will have to be passed on.

That means end-user prices rising, wages constrained, and hiring intentions put on hold.

According to a new poll of owners and C-suite executives at mid- or medium- sized companies by KPMG in Canada, 66% of respondents believe interest rates will likely rise enough to cause a global economic slowdown.

Seven in ten said that their margins have already faced material pressure and 54% say higher rates will impair their business with a loss in value.

A similar share indicated that rising salaries have translated or will translate into higher costs to their customers.

Expansion plans

Almost half of respondents said that higher interest rates have derailed their investment or expansion plans.

Although 45% are putting expansion plans on hold, this is not only due to higher rates but also a lack of available talent.

For 59% of businesses, higher costs means speaking to lenders about revising loan agreements or covenants.

Paul van Eyk, partner and national leader, Restructuring and Turnaround Services, Deal Advisory, KPMG in Canada, says that, despite the challenges, it is reassuring that many companies are looking at how to minimize the impacts of the many headwinds they are facing.

"When we talk about restructuring, it's really approaching your best- and worst-case scenarios with a different lens and finding creative solutions to solve them," he said. "I always tell my clients, regardless of their size and complexity, 'cash is oxygen'. When looking at your cash flow you need to understand your oxygen level? As companies weather through these challenges, some businesses may have impaired values in the short term, but those values will once again rise. The issue is when; the timing of that return is uncertain, so companies need to pivot away from managing to a value and now start managing to liquidity and cash flow."