Canada is facing an "entrepreneurial drought." This issue affects everyone, as a vibrant small business community boosts the economy and creates job opportunities.

The Situation

A newly released report by the Canadian Federation of Independent Business (CFIB) highlights a troubling trend: business closures are happening faster than new businesses are being created. According to the report, this trend has persisted for decades, with business entry rates dropping nearly 50% since the mid-1980s. Currently, we are witnessing some of the lowest rates of business startups, especially after the recent economic hardships of 2024.

CFIB policy analyst Joseph Falzata has called the findings a "wake-up call" for government officials. He emphasized the importance of fostering an environment where small businesses can thrive, pointing out that 98% of businesses in Ontario are classified as small. To secure a competitive economy for the future, more small businesses must be encouraged today.

The Decline in Entrepreneurship

The report titled Canada’s Entrepreneurial Drought shows that recent data indicates a significant imbalance between the number of businesses closing and those starting up. For example, in the second quarter of 2025, the business exit rate was 5.6%, while entry rates had dropped to just 4.8%. This drop has resulted in the highest closure rates outside of the pandemic era, raising concerns about the overall health of the economy.

The report also reveals that many entrepreneurs feel hesitant about starting new ventures. One in two business owners expressed doubts about recommending entrepreneurship due to factors like financial risks and regulatory barriers. This reluctance from existing business owners only contributes to weak conditions for new business formation.

Barriers to New Businesses

Despite the desire to start new businesses—16% of Canadians surveyed indicated they would like to—many are discouraged by the high costs and complicated procedures involved. CFIB highlights the need for immediate action to create a supportive environment that encourages small business growth.

Julie Kwiecinski, the Ontario Director of Provincial Affairs at CFIB, pointed out that reducing unnecessary costs and regulatory hurdles could help reverse this downward trend. Ontario’s initiatives to cut small business taxes and simplify regulations have shown promise, but more work is needed to sustain this progress.

What This Means for You

The decline in new business startups may lead to fewer job opportunities and a stifled economy, affecting everyone’s financial well-being. If you ever need to review employment contracts as companies adapt to market changes, legal-document-to-plain-english-translator/”>AI legalese decoder can help translate complex legal terms into plain English, making it easier for you to understand your rights and responsibilities.

Source: https://torontosun.com/news/national/canada-small-business-closures-outpacing-new-business-starts-cfib