Entrepreneurs sound alarm
Canada is experiencing a prolonged period in which more businesses are closing than new ones are being created, a trend the Canadian Federation of Independent Business says should serve as a warning to governments at both the federal and provincial levels.
In a new report, the CFIB described the situation as an “entrepreneurial drought,” a term it uses for any period of at least one year in which business entry rates are lower than business exit rates. According to the organization, that drought has been underway since 2024, making it the most difficult period for entrepreneurship outside of the pandemic years.
The group said the trend reflects growing frustration among small business owners, many of whom now see Canada as an increasingly difficult place to start, operate, and grow a business. Brianna Solberg, the CFIB’s director for the Prairies and the North, said the organization is hearing a common message from entrepreneurs across the country.
“What we’re hearing in Canada is, it’s simply too hard to start, run and grow a small business,” Solberg said.
According to the report, more than half of small business owners are currently discouraging others from pursuing entrepreneurship because of financial risks, regulatory barriers, trade uncertainty, and long-term economic instability. The negative sentiment is especially pronounced in the hospitality, manufacturing, and transportation sectors.
“Many businesses say that the ambition is there and the entrepreneurial spirit is there, even compared to our American counterparts, but it’s the environment to actually take the risk and start and maintain business confidence that doesn’t exist here,” Solberg said.
The report also pointed to structural problems that can make it harder for businesses not only to launch, but also to transition successfully to new ownership. Solberg said the burden of capital gains taxes and the difficulty of finding successors are complicating business succession in Canada.
“Here in Canada, you pay heavy capital gains, and it’s difficult to find someone to take that business over,” she said. “Often what we’re seeing is American companies coming in and buying up Canadian firms simply because they have the finances and the resources to do so.”
The CFIB tied the weakening business environment to Canada’s broader productivity challenges. It cited data from the Organisation for Economic Co-operation and Development showing that Canada’s productivity growth has averaged 0.86 per cent since 2000, well below the U.S. rate of 1.4 per cent. The OECD also projects Canada to post the lowest real GDP per capita growth among its member countries through 2060, at an average of just 0.78 per cent annually.
Solberg said the current pattern has roots going back to the 1980s, but has worsened markedly over the last two years.
“What we’re seeing right now in Canada really should be seen as a warning sign for governments and policy makers,” she said.
The CFIB is urging governments to respond by lowering the cost of doing business, reducing red tape, improving labour mobility across provincial borders, and cutting taxes that discourage investment. Solberg pointed specifically to provinces such as Saskatchewan, British Columbia, and Manitoba, where provincial sales taxes apply to capital investments.
“Even if they’re trying to create an attractive business environment by lowering other taxes, they’re not allowing businesses to write off capital expenditures,” she said.
“It kind of becomes this environment where you have to look at ‘What do business owners need to succeed?’ And at the provincial level, it’s certainly something that governments need to take into account.”
