One in six small businesses consider pulling the plug
One in six small businesses is contemplating permanent closure amid lockdowns to combat the COVID-19 pandemic, according to the Canadian Federation of Independent Business.
The CFIB says the situation has worsened since summer and that their latest estimate indicates more than 181,000 business owners are considering pulling the plug, putting 2.4 million jobs at risk.
“We are not headed in the right direction and each week that passes without improvement on the business front pushes more owners to make that final decision,” said Simon Gaudreault, senior director of national research at the small business association. “The more businesses that disappear, the more jobs we will lose and the harder it will be for the economy to recover.”
Businesses in the hospitality and arts and recreation sectors are most at risk, with roughly one in three actively considering closing. This includes restaurants, hotels, caterers, gyms and arts venues.
Gaudreault said there is still time for business owners to change their minds if conditions improve, but CFIB is predicting that as many as one in five businesses could permanently close by the end of the pandemic. Around 58,000 were already tallied as “inactive” in 2020, according to the association.
Across the country, only 47 per cent of businesses remain fully open, down from 62 per cent at the end of November.
As for employment, only 36 per cent are fully staffed, down from 41 per cent at the end of November, and only 22 per cent report they are making normal sales.
These numbers are lower for provinces under lockdown restrictions. In Ontario, for example, which entered a provincewide lockdown of non-essential businesses on Dec. 26 and even tighter restrictions earlier this month, only 37 per cent of businesses are fully open, 32 per cent are fully staffed and 18 per cent are making normal sales.
“The beginning of 2021 feels more like the fifth quarter of 2020 than a new year,” said Laura Jones, CFIB'S executive vice-president. She urged governments to help small businesses replace pandemic subsidies with sales by introducing safe pathways for them to reopen to limited customers.
The CFIB estimates that the number of businesses whose viability is threatened by the pandemic could be as low as 71,000 or as high as 222,000 — between seven and 21 per cent of all businesses. The number of jobs put in jeopardy by the crisis ranges from 962,000 and 2.95 million, the association said, based on its projections.
So far, the concerns of small businesses do not seem to be translating directly into insolvency filings, according to a report this week from Statistics Canada.
“This decline in insolvencies during the COVID-19 crisis could partially be explained by the government programs to support businesses and help them stay afloat during this difficult period,” the Statcan report said.