Low revenues and uncertainty of what lies ahead leaves owners in a tight spot
Through its Small Business Every Day campaign, the Canadian Federation of Independent Business (CFIB) has encouraged people to engage others through social media about their favourite local shops and stores. A new CFIB report suggests showing those businesses some love is particularly crucial during the COVID-19 pandemic, as many are at risk of closing.
One in seven small and medium-sized enterprises (SMEs) are at risk of closing across Canada, according to mid-range estimates compiled in the report, which was released Wednesday. In Atlantic Canada alone, almost 8,500 SMEs are estimated to be at risk, accounting for approximately 12 per cent of all SMEs in the region.
"I think every business association and organization across the country understands the importance of re-emphasizing this message to consumers — that they can make an enormous difference with their buying decisions," said Jordi Morgan, CFIB's vice-president for Atlantic Canada.
"This is not to say that people are not going to go out to the big box stores, but if there's an alternative small business that you feel would benefit from your patronage, we're asking people to give that consideration. These are your friends, your neighbours, the people that contribute to your community, and we think when they're having a tough time, the appropriate consumer response is to provide whatever support is necessary."
The CFIB report compiled low-end, mid-range and high-end estimates for all provinces and territories. The high-end projection for closures in Atlantic Canada jumps up to 12,459 SMEs, almost 18 per cent of all those currently existing in the region. The low-end estimate of 3,645 SMEs accounts for about five per cent of those in Atlantic Canada. The estimates are based on information compiled in a member survey conducted June 26 to July 2.
"I think what you're seeing is a lot of uncertainty from business owners, and that explains some of the range here as well," said Morgan, who is based in Halifax. "The uncertainty also stems from what kind of economic activity they're going to be seeing over the next number of months. Will you see a rebound in consumer spending?"
Challenge doing business
Vaughn Hammond, director of provincial affairs for the CFIB in Newfoundland and Labrador, said with many public health restrictions still in place, businesses are finding it challenging to operate and are still sorting out the best way to proceed.
"The question then becomes, how do we make sure that we don't lose those businesses that are at risk," he said. "We argue that certainly the government has to provide support, and if the consumer is able to, then they should do so as well."
A number of support programs and measures have helped SMEs so far, with Hammond lauding the Canada Emergency Wage Subsidy and Canada Emergency Business Account as programs that have been well used and beneficial. But he said the Canada Emergency Commercial Rent Assistance program has left many businesses reliant on landlords to act on their behalf.
"For the most part, they're able to deal with their labour costs through the wage subsidy, if they need it. But it's rent relief that a lot of our members in Newfoundland and Labrador are looking for," said Hammond.
"If the federal government is not willing to come forward with a solution in terms of allowing a tenant to receive the funding directly in order to help pay for their rent, as opposed to relying on their landlord to apply for the assistance, I think that's the crux of it for a lot of people. If they can't pay their rent, they're going to get evicted. Right now, what they're getting is deferred rent, which means they'll still have to pay it. But if the revenues aren't there to pay, then what do they do?"
According to a CFIB dashboard tracking business recovery that was updated Monday, most Atlantic Canadian provinces are close to the national averages. Nova Scotia (70 per cent) and New Brunswick (72 per cent) are both above the national average of 62 per cent for businesses being fully open. Prince Edward Island is trending well when it comes to businesses at or above normal staffing levels (45 per cent compared to 37 nationally) and businesses at or above normal revenues (33 per cent compared to 26).
"Prince Edward Island, they haven't been hit as hard as some of the other jurisdictions," Morgan said, noting many businesses were able to open earlier than in other Atlantic provinces.
He says optimism is a bit higher in P.E.I., and the report's data does reflect that somewhat, as the mid-range estimate has only four per cent (220) of SMEs on the island at risk of closing.
The hospitality sector has been hit hard throughout the region. Hammond and Morgan both cite it as an important industry within their home provinces.
"I think that the Atlantic bubble has been an improvement," said Morgan. "Such a high percentage of the tourism sector comes from the region itself. But the bread and butter is people coming from other areas of the country, and with that not happening, I think that's where you see an enormous amount of concern for business owners."
The CFIB report also singles out the arts, recreation and events sectors for needing further help to make it through a very hard time. Morgan noted the summer is usually full of meetings, festivals and other events providing employment for thousands of people, but they have mostly vanished because of the COVID-19 pandemic.
"Under any circumstances, these are very worrying numbers, because these are very important parts of our economy," Morgan said. "The small business sector is enormously important to Canada's economy, and it's enormously important here in Atlantic Canada. … We're going to be looking at government over the course of the next number of months to see what they can do to assist businesses and help them recover as time goes on. We're not out of the woods on this one by any stretch of the imagination."
Mid-range estimates for SMEs at risk of closing (percentage of SMEs in brackets):
• Newfoundland and Labrador: 2,735 (16%)
• Prince Edward Island: 220 (4%)
• Nova Scotia: 2,272 (9%)
• New Brunswick: 3,247 (15%)
• Canada: 158,218 (14%)