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What you need to know about COVID-19 today
In these uncertain times, one thing you can be certain of — when the government fiscal life-saving measures provided through deferrals and subsidies disappear — is that small-business bankruptcies and closures will surge.
The math is clear, and without continued support, many business owners will slip below the surface.
Following a summer of economic recovery, an autumn of growing uncertainty is upon us. The light at the end of the tunnel is, in fact, a train loaded with tens of billions of dollars in deferred debts bearing down on both consumers and businesses.
Those postponed tough decisions must be made, and the hardship will be very real. As Canada Mortgage and Housing Corporation president Evan Siddall noted: “It’s an unemployment and ‘people getting thrown out of their home’ problem.”
While the chief medical officers of health have been insistent there will be a second wave of COVID-19 infections in the Atlantic provinces, it has yet to materialize.
Strangely, however, politicians have not been talking much about the impending wave of economic failures, and no amount of social distancing, mask-wearing, or hand sanitizer will prevent those.
The small-business sector, the backbone of Canada's economy, is suffering. Over the course of the last six months, the Canadian Federation of Independent Business (CFIB) has conducted 21 national surveys, eliciting more than 160,000 responses from small-business owners across the country. In the most recent survey, 14 per cent stated they are actively considering bankruptcy or winding down their business because of COVID-19. That number has grown two points since May.
This research suggests at least 55,000 — and as many as 218,000 — small businesses are looking at closing permanently. The number being widely circulated now is in the range of 160,000.
Hospitality, arts, recreation, information and social services sectors remain in big trouble. For many restaurants, propane heaters on outdoor patios simply won't cut it as we head into the colder weather. Some with stronger balance sheets going into COVID may survive, but many will not.
We still have not seen a plan by any of the Atlantic governments to navigate the economy out of these very dark economic waters.
In Nova Scotia, 59 per cent of business owners noted they would not easily survive a second wave of business restrictions. That number is over 70 per cent in Newfoundland and Labrador. Meanwhile, 34 per cent of businesses across Canada would survive less than a year on current revenues.
These are significant and distressing numbers. Keep in mind, the failure of a business does not only affect its owners; it affects staff, their suppliers and immediate community, not to speak of government revenues generated by the enterprise, including HST, payroll, corporate, property and income taxes.
According to Statistics Canada, there are still more exits than restarts, so the number of active businesses continues to drop. June showed an 11 per cent drop for Nova Scotia, with P.E.I. and New Brunswick faring slightly better at just under 10 per cent. Newfoundland and Labrador business numbers contracted by 14 per cent. The industry numbers for hospitality and recreation, arts and entertainment are down close to 25 per cent.
While the federal throne speech indicated help is on the way, CFIB is hoping it’s not too little, too late.
Extending and expanding the Canada Emergency Business Account is necessary, as are improvements and expansion of the Canada Emergency Wage Subsidy. CFIB is still hoping to hear something positive from the federal government on rent very soon.
Some regional help came last week with $60 million for Atlantic Canada in the Regional Relief and Recovery Fund administered by ACOA. However, many business owners are not keen on taking on more debt, regardless of very favourable terms.
While the Atlantic provinces don't have the funds to prop up the economy like the federal government does, there are things they can do. On the bright side, CFIB is pleased to see consideration of permanent removal of the unnecessary regulatory restrictions that were temporarily removed during the early days of the pandemic.
As the data clearly show, many small businesses are on critical life support. This is not the time to make it more difficult to hang on. We need a plan.
Jordi Morgan is vice president, Atlantic, for the Canadian Federation of Independent Business