1 in 6 businesses at risk of closing due to COVID-19: CFIB

Statistic after statistic points to the debilitating state of commerce in Canada. But what exactly do all those pandemic-fuelled business closures mean for cities like Saskatoon, Vancouver or Toronto?

Data released this week by the Canadian Federation of Independent Business shows the situation is dire. More than one in six businesses – at least 239,000 across Canada and 6,483 in Saskatchewan – are at the risk of permanently disappearing because of COVID-19, or have already closed.

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Economists, public policy stakeholders and municipal planners are split on how exactly this will affect the future of downtown cores and surrounding areas.

In interviews with the Winnipeg Free Press, experts described how jarring shifts in local economies will cause hypercompetition in some sectors, while others might completely disappear. It could also cause fewer jobs overall, less walkable areas, limited shopping options, and a rapid loss of the “biz village” concept, they said, along with severe population declines.

If there’s one thing they can all agree on, however, it’s that Canadians cities will likely never look the same again. And if governments plan on bringing things back to a sustainable “new normal,” analysts believe preparation for it should begin as soon as possible.

“I think there’s an implicit assumption that we’re in a sort of snow globe right now and that everything’s suspended so that one day soon we’ll all go back to normal,” said Vass Bednar, a policy expert who’s held several public and private sector leadership roles, including at Airbnb and Queen’s Park in Toronto.

“Those assumptions are almost certainly wrong,” she said. “The fact is, everyone will quickly notice how different things already are when they go on a walk around their cities to see not just closed signs, but also the larger store or restaurant signs taken off to indicate permanent closures for so many of their favourite places. And it will only get more severe.”

CFIB’s latest figures suggest that at least 58,000 businesses have already permanently closed their doors following pandemic-related lockdowns and restrictions in 2020.

Based on a survey of its members done between Jan. 12 and Jan. 16, the organization now says a mid-range of at least 181,000 small business owners are also considering to close down or declare bankruptcy on top of last year’s numbers, adding up to 239,000 in total.

But should things remain unchanged, by the end of this year, closures could rise up to 280,117 across Canada. In Saskatchewan, that’s roughly 7,891 storefronts – with even the lowest estimates suggesting at least six per cent (5,601 businesses) will be lost.

That means more than 2.4 million people will likely be out of work – a staggering 20 per cent of private sector jobs, or just about one in seven of all employment in Canada.

“They’re all very scary figures,” said Jonathan Alward, Prairies director for CFIB. “I really, truly hope we’re wrong on this. But it just doesn’t seem like we are, at least not right now.

“In an ordinary time, businesses would never want to be rescued with help from the government. But right now, I think creating pathways for safe openings by tax breaks, subsidies and other strategies to provide easier access is just as important for communities themselves than the business owners.”

Fletcher Baragar is an economics professor at the University of Manitoba who’s extensively researched how bankruptcies and bailouts affect societies and communities. He said he’s never seen more closures than this past year – not during the 2008-09 financial crisis, or even in his studies of recessions that occurred before the turn of the millennium.

“It’s a common thing to see exits and entries all the time in the market – healthy changes are the whole point of an entrepreneurial marketplace,” Baragar said. “But when that business change happens so rapidly, it certainly affects everything else... and it’s incredibly uneven in the type of areas and sectors it affects when some benefit from it and others die out of it.”

Hospitality and arts are two of the hardest-hit sectors, CFIB data indicates, with 33 per cent and 28 per cent of businesses in those sectors expected to close up shop. In the retail sector, it’s 15 per cent of companies.

At the other end of the spectrum, agriculture and natural resources are the lowest-impacted of any sector – still, with six per cent of businesses expected to close. Next is construction, at nine per cent, and manufacturing, at 12 per cent.

Provincial breakdowns show Newfoundland and Labrador will see the most severe impact, with a high-end estimate of 28 per cent of all businesses to close. That’s followed by Alberta at 25 per cent and Ontario at 24. Saskatchewan is at 21 per cent, and Nova Scotia is least-impacted at 14 per cent.

That’s why business owners have begun to ask themselves tough questions, Baragar said, about whether it’s even worth opening up when they’re allowed to and if it’s something they can afford financially.

“Of the ones remaining, I think there’s going to be a lot more consolidation and amalgamation internationally and from one side of the country to the next,” he said. “And that means fewer buying and service options for quite literally everything – restaurants, clothing, you name it.”

Sylvain Charlebois, a leading supply chain expert, said these shifts will also cause city demographics themselves to change. Pointing to recent Starbucks coffee shop closures, he said food companies are making note of this, and will “always go where the money is” – which he doesn’t believe is in urban centres anymore.

“Of course, the cost of city dwelling is a cruel barrier anyway,” said Charlebois, who’s a professor at Dalhousie University in Halifax. “More than that, there’s other reasons that are also important. When businesses close in areas where they were supposed to be forming villages or walkable communities, it impacts the kind of people that want to live in those cities and how much they actually spend. It’s a cycle.”

As a policy expert, Bednar believes messaging from government has been a crucial part of what makes the future for urban business so frazzled. “It was so much easier just to tell everyone to move online and give them some subsidies to string along,” she said.

“Eventually, when this is finally over, what happens when we’re offline again? Can you actually market or promote tourism if you don’t have physical stores? It might be time to start changing how we’re thinking and talking about these things.”

Editor's note: Manitoba statistics have been replaced with Saskatchewan statistics.

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