Canada's small business sector is facing a significant challenge, with business closures outpacing openings for the past six quarters, according to a new study by the Canadian Federation of Independent Business. The CFIB's report, titled "Canada's Entrepreneurial Drought, Part 1: The Shrinking Business Landscape," highlights a concerning imbalance between business creation and closures across the country. This trend, defined as a sustained period of four or more quarters where business exits exceed new entries, has been ongoing since early 2024.
While the overall rate of business creation in Canada has been declining since the mid-1980s, closures had mostly been lower than openings. However, recent data indicates a shift. In the second quarter of 2025, the business exit rate reached 5.6%, while the entry rate fell to 4.8% in the fourth quarter of 2025. These figures represent some of the highest closure rates and weakest startup activity observed outside of the pandemic period. A recent Youtube video stated that approximately 45,000 Canadian businesses are closing every month.
According to the CFIB, a significant number of small business owners are not optimistic about the current climate. More than half (55%) would not recommend starting a business right now. Two-thirds of small firms feel unsupported by their provincial governments, with only 3% strongly believing their government has a clear vision for entrepreneurship. Furthermore, 73% expressed a lack of confidence in the federal government. The CFIB also stated high costs, tax and payroll pressures, complex rules and red tape contribute to the problem.
Jonathan Galgay, CFIB's Director of Legislative Affairs for Newfoundland and Labrador, emphasized the importance of supporting small businesses for economic growth. "While governments continue to invest heavily in large corporations, small businesses on Main Street are being left to navigate rising costs and regulatory burden on their own," Galgay stated. He urged policymakers to align government action with small business realities by lowering taxes, reducing red tape, and creating conditions for investment and entrepreneurship across the country.
