Winter is coming
Businesses’ problems far from over as economy reopens
Pia Bouman's monthly revenue as a longtime ballet teacher in Toronto's west end has not changed very much in the past few weeks even though the local economy is progressively moving into the deeper stages of reopening.
Physical distancing rules means that in-person attendance at her non-profit Pia Bouman School of Ballet and Creative Movement has to be limited to a maximum of three or four students per class, a third of the class size she used to have in pre-pandemic times.
After each class, a thorough cleaning and sanitizing process begins. Despite the precautions, demand for inperson classes has remained low, with just five classes per week.
“The landlord has not given us leave yet,” said Bouman, who has not paid rent since her revenue dried up in late March. “But if we lose this school because of rent arrears, the ramifications would be huge for this community: there are hardly any dance spaces in the west end of Toronto.”
Bouman's dance school is one of many small businesses that are continuing to struggle despite nationwide rules that now allow for most indoor activities to resume and for gathering in relatively large groups (albeit at a distance).
The problems vary according to business and are complex in nature, but include potential landlord troubles, customer comfort levels and a looming Canadian winter that will shut down patio sales.
Bouman's landlord, for example, has not yet chosen to apply to the Canada Emergency Commercial Rent Assistance (CECRA) program, the federal subsidy for landlords, meaning she could be served an eviction notice at any point.
At the height of the pandemic in early April, just 21 per cent of small businesses were open, according to data from the Canadian Federation of Independent Businesses. That number has tripled as of Aug. 5, but approximately 75 per cent of small businesses also report that they are making less revenue than they would have at this time of the year, and 26 per cent said they are making less than half what they used to.
“There are people out and about, in parks, walking, biking, cycling, but not many are actually coming in and purchasing things, especially if it requires being in an indoor space for a long time,” said a sales manager at a downtown Toronto branch of clothing store Zara Inc. “Usually, we'd be packed for end-of-summer sales.”
A few units away from Bouman, the owner of Mosaic Yoga, Morgan Cowie, is facing a similar problem: her yoga studio is open for classes, but business has been bad.
“Revenue is dismal right now. I am working solo, seven days a week, and I'm just trying to somehow keep things ticking along, but it's really grim right now,” Cowie said.
Things are not much different since the Financial Post talked to Cowie back in March. Mosaic Yoga, at that point, had just refunded most of its membership fees, and introduced Zoom classes.
“One of the problems for us is that people are just not comfortable wearing masks or shields indoors yet, and I think that behavioural modification is hard for people,” she said. “I'm also worried as to what will happen when CERB (Canada Emergency Response Benefit) runs out, but, look, August has always been a slow month so maybe September will be better as people get back to the routine of school.”
Many of the federal government's income support measures have provided a lifeline for small businesses to this point, but there's a degree of trepidation among some owners as to what will happen when the programs are modified, or stopped altogether.
For example, Cowie has been personally surviving on CERB. Her business was not eligible for the government's wage subsidy program so she had to let all her staff go and does not plan to hire most of them back until business picks up.
Almost 40 per cent of business owners with up to four employees have used CERB, according to CFIB data, and that program is scheduled to end on Oct. 3.
The self-employed who have been paying into employment insurance will be able to access some benefits, but the payout rate will depend on their employment history and the extent of their contributions.
The federal government's modified wage subsidy program is designed to give out a smaller subsidy to companies whose revenues are improving. Those that need the help most, however, could get a wage subsidy as high as 85 per cent, up from the 75 per cent that can be currently claimed.
Margins are so thin for independent retailers that even the slightest increase in costs can push them into uncertain territory.
Both the retail and food sectors have somewhat recovered since provincial economies began reopening. The latest employment data from Statistics Canada showed that food service jobs rose by 100,500 in July, although that number was still 300,000 fewer than what it was in February.
But the recovery could be short-lived since many restaurants are relying on patio sales.