The ratio between business starts and closures is among the worst since the COVID-19 pandemic, says CFIB. (Credit: Getty Images)
More small businesses closed than opened in Canada for the sixth consecutive quarter, according to research by the Canadian Federation of Independent Business (CFIB).
Small-business exit rates hit 5.6 per cent in the second quarter of 2025, while the entry rate fell to 4.8 per cent in the fourth quarter. The ratio between business starts and closures is among the worst since the COVID-19 pandemic, CFIB said in a report.
“Small and medium-sized enterprises (SMEs) are facing one of the most challenging business environments in decades,” the report said. “Escalating input costs, tax burdens, labour shortages, regulatory pressure and global economic uncertainty are collectively constraining entrepreneurial activity nationwide.”
CFIB, Source: Statistics Canada
The CFIB said entrepreneurship in Canada has been on a slow decline since the 1980s, though things have been particularly more troubling in recent years.
“While there have always been ups and downs, business creation has fallen markedly compared to past decades and the two rates are almost at the same level as of 2023,” the report said.
Since 2019, business insolvencies have climbed 24 per cent, according to Innovation, Science and Economic Development Canada data.
CFIB pointed to excessive paperwork, labour challenges, inflation and the condition of the broader Canadian economy as main contributors to the rise in small-business closures.
The challenges are weighing on small-business owners, 55 per cent of whom would not recommend entrepreneurship in the current economic climate.
Many of them feel governments haven’t stepped up to help, with two-thirds saying they don’t feel supported by provincial governments and 73 per cent are not confident in the federal government.
“Small businesses have watched governments hand out billions of dollars to multinationals while ignoring the realities on Main Street,” Michelle Auger, CFIB director of trade and marketplace competitiveness, said in a news release. “Governments need to wake up. If we want a more productive and competitive economy tomorrow, we need more small businesses today.”
The federal government has announced a $1-billion Regional Tariff Response Initiative and the Build Communities Strong Fund meant to support small and mid-sized businesses.
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