Small businesses struggling amid inflation and labour shortages: CFIB

Labour shortages, inflation and high energy costs are all dragging down small business confidence, according to the Canadian Federation of Independent Business.

After a tough two-and-a-half-years trying to recover from the COVID-19 pandemic’s financial blow, small businesses are once again struggling.

Their “business barometer,” which representing 95,000 businesses they work with across the country, it fell eight points over the last three months.

“You have a lot of businesses again that are facing a radically different business environment than three years ago,” said Simon Gaudreault, Chief Economist for CFIB.

Only 32 per cent of businesses the CFIB represents say they are in good shape, while 20 per cent are in bad shape. Over 60 percent of business owners surveyed are still dealing with debt taken on during the pandemic.

The average amount of debt right now is $160,000 and skyrocketing inflation is creating new challenges.

Statistics Canada says the inflation rate hit 8.1 per cent in June 2022 on a year-over-year basis, the largest increase since Jan. 1983.

“So you can see here all of the burden they have to carry with them and the exposure to interest rate hikes and that’s why frankly many of them are worried about what’s ahead,” added Gaudreault.

As families scale back to afford food and gas, sales are taking a direct hit. “The 30 percent reduction [in foot traffic], you may not notice when you look at it but the small business will notice because their margins are so thin. For a dry cleaner to have a 30 percent foot reduction is the difference between having a profitable business or not. ”

The largest limitation of business growth has been labour shortages, for both skilled and unskilled workers, according to CFIB’s survey while fuel and energy costs are the top cost constraint affecting small business with 76 per cent of those surveyed.

According to CFIB, about one in six businesses are considering shutting down for good.

“In the past few months, we have seen an uptick in the number of bankruptcies but this is only the tip of the iceberg because so many businesses will permanently wind down or close the business without going through the bankruptcy process.”

More bankruptcies and quiet closures are expected in the coming months as right now, only 54 per cent of small businesses say they are back up to pre-pandemic sales.