Canada is currently facing a concerning trend: for the sixth consecutive quarter, the number of businesses exiting the market has surpassed the number of new businesses being created. This "entrepreneurial drought," as termed by the Canadian Federation of Independent Business (CFIB), signals potential challenges for future job creation and economic growth.
The CFIB report highlights that this imbalance reached a concerning level by mid-2025, with the national exit rate at 5.6% in the second quarter, while the entry rate later dropped to 4.8% in the fourth quarter. This signifies a net loss of 7,067 businesses in Q2 2025 alone. Brianna Solberg, CFIB's director for the Prairies and the North, emphasized the difficulty of starting, running, and growing a small business in Canada.
This issue isn't new; the CFIB notes a decades-long decline in business dynamism. In 1984, business entry rates were around 24%, with exit rates at approximately 16%. By 2023, both rates had fallen to about 12%, with entry rates nearing historic lows. Small businesses cite high costs, economic uncertainty, and heavy regulation as key impediments. The CFIB is urging federal and provincial governments to take action, including cutting taxes, improving labour mobility, and reducing regulatory burdens.
The continued decline in new business creation and the increasing rate of business exits present a significant challenge to Canada's economic future. Addressing the concerns of small businesses and fostering a more supportive environment for entrepreneurship will be crucial to reversing this trend and ensuring long-term economic prosperity for Canada.
