Canadian small business owners are increasingly worried about a looming recession and persistent economic challenges, leading many to cut spending and scale back hiring. Despite some regional upticks in confidence, the overall sentiment reflects significant concern over consumer demand, high operating costs, and the need for comprehensive tax reform to stimulate investment and foster resilient economic growth.
Canadian businesses brace for economic downturn
A recent poll of 150 small businesses in British Columbia, conducted by Merchant Growth, reveals that nearly 60% of surveyed owners believe Canada is already in a recession or experiencing an economic downturn. This perception is directly impacting business decisions, with approximately 65% having already cut spending. The summer job market is expected to be leaner, as many businesses are not hiring the usual number of seasonal employees. Three out of four businesses are actively concerned about a potential recession within the next year.
Key takeaways
- Recession fears: A significant majority of small business owners believe Canada is either in a recession or heading towards one.
- Spending cuts: Businesses are reacting by reducing expenditures and scaling back hiring plans.
- Low consumer demand: High living costs are pushing consumers to limit spending, impacting small and medium-sized enterprises (SMEs).
- Operating costs: High taxes and fees, such as WorkSafe BC premiums, continue to burden businesses.
- Call for government support: Business leaders are urging provincial and federal governments to implement policies that support small businesses, including tax reform and supply chain diversification.
Confidence fluctuates amid persistent challenges
While overall confidence remains fragile, there have been some regional improvements. British Columbia, for instance, saw its small and medium-sized enterprise (SME) confidence rebound to 53.4 points in June on the Canadian Federation of Independent Business (CFIB)’s 12-month outlook, a sharp increase from 26.5 in March. However, this is still slightly down from June 2024’s 55 points, indicating a shaky recovery. The Business Development Bank of Canada (BDC)’s health index for B.C. SMEs was 95 points in the first quarter of 2025, down five points from the previous year, and below the Canadian average of 99.3 points.
The call for tax reform and investment incentives
Canadian business leaders are advocating for significant tax reform to drive investment and foster economic growth. A KPMG in Canada survey found that 91% of business leaders believe it’s time to simplify the tax system and cut the investment tax rate. Key findings from the survey include:
- 91% say Canada must simplify the corporate income tax system.
- 90% agree that Canada needs to eliminate barriers to investment.
- 90% say Canada must reduce tax rates on investment to stimulate economic growth.
- 91% believe governments need to implement tax and regulatory policies that encourage greater investment and accelerate technology adoption.
Businesses are also concerned about the impact of U.S. tax policies and tariffs, which could make Canadian investments less competitive. There is a strong desire for policies that encourage long-term investment in Canadian startups, small- and mid-sized businesses, and scale-ups, with 88% of business leaders supporting a preferential capital gains tax rate for private capital investment.
Sources
- Understanding the weakness in business investment, OECD.
- BC small business confidence rises after record lows, Business in Vancouver.
- Small business owners see Canada in recession: poll, CityNews Vancouver.
- Canadian businesses want tax system to drive investment and resilient economic growth, PR Newswire Canada.
- Families and businesses concerned tariffs will effect youth sports, BNN Bloomberg.
