Opinion: Pandemic symptoms still haven’t passed for small businesses, CFIB’s Kelly says

5 min read

Last Friday, the World Health Organization declared an end to the COVID-19 “global health emergency.” From Dan Kelly’s view, an awful lot of Canadian small businesses still look pretty sick.

“It is really worrisome right now,” said the president and chief executive of the Canadian Federation of Independent Business (CFIB), the national small-enterprise lobby group representing nearly 100,000 members. “Small businesses are really struggling to get back to normal.”

While the Canadian output and employment surpassed pre-COVID levels about a year-and-a-half ago, CFIB surveys show that sales at roughly half of small businesses are still below their norms before the pandemic. Nearly 60 per cent report carrying debts directly related to the pandemic – on average, more than $100,000. A survey taken late last year indicated that 17 per cent of owners were considering permanent closing, citing the lasting damage from the COVID-19 crisis.

This has been a uniquely complicated economic recovery, not least for the owners of small operations who have, in many ways, been on the front lines of three years of turmoil.

The overall economy bounced back more quickly and strongly than even the most optimistic forecasters had hoped. But that recovery has been uneven, and beneath the surface, consumption patterns have been redrawn, quite possibly permanently. Work-from-home and hybrid offices have drained workers from the big-city downtown cores – and from the thousands of downtown shops that previously served their needs. Many small operators have yet to see their customer base fully return; some wonder if it ever will.

Even for businesses whose sales have fared well in the recovery, rising costs have dampened the success. Inflation spiked to four-decade highs, pushing up the costs of raw materials and other supplies. Wage demands have surged in response to inflation. Demand for workers continues to outstrip supply, contributing to wage pressures and straining operations for many companies. Fast-rising interest rates have compounded the debt woes left over from the pandemic.

“Every line is under massive pressure right now,” Mr. Kelly said. “Businesses are really buckling.”

I called Mr. Kelly last week to talk about the latest headache for the small-business sector: the strike affected more than 150,000 federal workers, including 35,000 staff at the Canada Revenue Agency (CRA), the department responsible for collecting federal taxes and other payroll deductions. Earlier in the week, after Ottawa had reached a deal with one of the unions involved but not with the CRA workers, Mr. Kelly issued a public statement urging the government to “legislate CRA staff back to work.”

He argued that the absence of CRA workers to handle monthly and quarterly remittances of taxes and payroll deductions, and to deal with inquiries and disputes, placed undue burden on small, independent operators who are already struggling as it is.

“Every day the strike drags on, there’s more financial harm to small business owners,” he said in a news release.

That harm was lifted by an agreement Thursday to end the strike. Mr. Kelly is still worried about the size of the wage settlement – ​​12.6 per cent over four years, plus a one-time $2,500 payment that represents another 3.6 per cent of the average salary. He fears those pay increases set a precedent that could contribute to relatively high wage demands not just among other public-service unions, but for workers in the private sector, too.

Not that most of the CFIB’s membership has to worry directly about bargaining with unions. In 2022, according to Statistics Canada, only 13 per cent of workers at companies with fewer than 20 employees were covered by union contracts. (The overall union coverage rate across all workers was 30 per cent.)

Still, small businesses have to compete with other private- and public-sector employers for workers – and that competition is fierce right now, with labor supplies much more scarce than usual. Wages for public-administration employees already average about 25 per cent more than the overall national average, Statscan data shows.

“The private sector does struggle to keep up,” Mr. Kelly said.

It all sounds pretty bleach. Maybe that’s an occupational hazard for someone in Mr. Kelly’s position – he’s paid to spot the threats to the interests he represents, to point them out to the government, and to press policy makers to do something about it. “Everything is fine, don’t worry about us” would be a pretty unnatural position for a business lobby to take.

When I pressed him on whether he saw any cause for optimism out there, he admitted that, yes, he does – and it comes from the small businesses themselves.

The CFIB’s monthly Business Barometer, which gauges both short- and longer-term sentiment among entrepreneurs, has been rising since the year began, as inflation retreats and fears of a recession fade. Mr. Kelly cautioned that the tone remains “tentative;” the barometer readings are still below their historical averages. But it’s a sign that the small-business sector is beginning to grow more optimistic in the recovery, despite the obstacles.

“Running a small- or medium-sized business in Canada is not for the faint of heart. You have to be a fairly optimistic, self-confident person to do that in the first place,” he said.

“I haven’t counted them out yet.”

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