Brianna Solberg, director for the Prairies and the North at CFIB, joins BNN Bloomberg to discuss the decrease in small business entrepreneurship in Canada.

The Canadian economy is losing businesses faster than it can create new ones, and it is time for federal and provincial governments to act to reverse this trend, says the Canadian Federation of Independent Business.

A new report by the organization, calls it an “entrepreneurial drought,” which it defines as a year or more in which “business entry rates are strictly lower than business exit rates.”

It says the drought has been ongoing since 2024, making it the worst period for entrepreneurs outside of the pandemic.

“What we’re hearing in Canada is, it’s simply too hard to start, run and grow a small business,” says Brianna Solberg, CFIB’s director for the Prairies and the North.

More than half of small business owners are discouraging entrepreneurship at this time because of financial risks, regulatory hurdles, trade concerns and long-term uncertainty, according to the report.

The sentiment is most strongly felt 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,” says Solberg.

She says costs for businesses increase significantly once it hits a certain threshold, making even business succession difficult.

“Here in Canada, you pay heavy capital gains, and it’s difficult to find someone to take that business over,” says Solberg.

“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 Organisation for Economic Co-operation and Development (OECD), an international forum of 38 democracies, says Canada’s productivity growth has averaged 0.86 per cent since the year 2000, which is far behind the U.S. rate of 1.4 per cent.

It also projects Canada to have the lowest real GDP per capita growth among its members through 2060, averaging only 0.78 per cent per year, which is less than half the expected U.S. rate.

Trend has been getting worse

Solberg says the trend of businesses exiting faster than entering the economy has been ongoing since the 1980s, but has gotten significantly worse in 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,” says Solberg.

She says she hopes governments take action to address the rising cost of doing business by cutting takes, improving labour mobility across provincial borders. and reducing regulatory burden, which exists at the federal and provincial level.

For example, provinces, such as Saskatchewan, British Columbia and Manitoba, hinder business growth by applying provincial sales tax to capital investments, she says.

“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,” says Solberg.

“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.”