Indications of optimism as businesses reveal impact of coronavirus
A remarkable 62% of companies think they could return to ‘normal operations’
TORONTO More than 40 per cent of Canadian businesses have laid off staff and 38 per cent have reduced staff hours or shifts as a result of the coronavirus-induced economic shutdown, according to a new survey by Statistics Canada and the Canadian Chamber of Commerce.
The survey of more than 13,000 businesses conducted between April 13 and April 24 also found that a whopping 80 per cent of businesses experienced a “medium to high drop in demand” for their products or services and more than 50 per cent of businesses experienced a decrease in revenue of over 20 per cent in the first quarter of 2020, compared to the same time frame a year ago.
“When this crisis started, one of the biggest challenges for many businesses was liquidity,” said Trevin Stratton, chief economist at the Canadian Chamber of Commerce. “The numbers that we released today show that many businesses are approaching the threshold where they might have to permanently shut down if social distancing persists.”
Revenues slid as much as 20 per cent at 18 per cent of businesses, while 10 per cent reported a revenue increase and 14 per cent indicated there was no change.
Conversations about reopening the economy have begun in various regions, but only 32 per cent of businesses surveyed said they could remain open longer than six months amid social distancing protocols, while an additional 50 per cent said they would not be able to remain open for longer than six months, illustrating the likelihood of a prolonged economic recession while governments attempt to restart their economies in phases.
One positive from the data, Stratton said, is the resiliency that businesses have shown in adapting to the crisis: 45 per cent of businesses said they are using new methods to interact with customers and 35 per cent said they have started offering altered products or services.
A remarkable 62 per cent of businesses acknowledged that they would be able to return to a state of “normal operations” within a month if all social distancing measures were removed.
“It’s important that governments look at interprovincial alignment when deciding how to open up, in order to minimize cost and confusion for businesses especially those whose supply chains are integrated across provinces,” Stratton said.
Another positive sign came from the Canadian Federation of Independent Business. Its Business Barometer, which measures small business confidence, in April rose nine points to 46.4, roughly 16 points above its late-March lows, but still at levels last seen during the 2008-09 recession.
“There are still dark clouds hanging over Canadian small businesses, but it seems one or two may have lifted this month,” Brian DePratto, senior economist at TD Economics, said in a note, adding that some of the government measures may have helped.
“Still, as big as the improvement off the low may be, today’s reading tells us that the majority of Canadian small businesses remain in a world of pain, and are likely to bear the brunt of the unprecedented economic contraction expected this quarter.”
According to the Statistics Canada/Chamber survey, mass layoffs appeared to be concentrated in the accommodation and food services sector, with close to 70 per cent of those businesses reporting layoffs of 80 per cent or more of their workforce. Overall, 45 per cent of businesses that laid off employees reduced their headcount by 80 per cent or more.
“Today’s results will provide an accurate picture of true impacts of the COVID-19 pandemic on the Canadian economy and will enable the best decisions at public and private sector tables across the country,” said Anil Arora, chief statistician of Canada.
Stratton said the Canadian Emergency Wage Subsidy (CEWS) program, which began accepting applications on Monday, and other federal and provincial loans for businesses could help mitigate further revenue declines, but there are businesses that have fallen through the cracks and are not eligible for any kind of income support.
“This data illustrates how important it is for federal support to be issued quickly,” he said.
More than 10,000 businesses submitted applications for CEWS on the first day the program opened, according to federal government data.
Going into the crisis, 42 per cent of businesses surveyed said they could not operate for more than 60 days without revenue, while 51 per cent said they had a 90-day cash buffer to remain in business without any source of revenue.
Many businesses are approaching the threshold where they might have to permanently shut down if social distancing persists.
TREVIN STRATTON