The Canadian Federation of Independent Business has released a report so damning it should be required reading for every elected official in this country. For six consecutive quarters, more businesses in Canada have shut their doors than have opened them. The entrepreneurial engine that built this country’s middle class, filled its downtowns, and powered its communities is stalling, and the data proves it has been stalling for longer than most Canadians have been willing to admit.
Released on April 15, 2026, the CFIB’s full report titled Canada’s Entrepreneurial Drought, Part 1: The Shrinking Business Landscape is the first in a two-part series examining the growing imbalance between business creation and closures across the country. The organisation, which represents 103,000 small and medium-sized businesses nationwide, did not mince words. The situation has officially crossed a threshold that demands a national response.
Canada is experiencing an entrepreneurial drought: a sustained period when business exits consistently outpace new business starts, leading to a shrinking entrepreneurial base and reduced confidence in the viability of entrepreneurship. That is not language borrowed from opposition politicians or economic pessimists. That is the conclusion of Canada’s largest association of independent business owners, drawn from hard Statistics Canada data.
The numbers behind this crisis are not subtle. In the second quarter of 2025, exit rates reached 5.6%, while entry rates fell to 4.8% in the fourth quarter of 2025, representing some of the highest closure rates and weakest startup activity outside the pandemic. To understand the weight of that finding, consider what it means in practical terms: Canada’s small business sector, the backbone of the national economy, is contracting at a pace that rivals the darkest period of the COVID-19 years, without any pandemic to blame.
Since the mid-1980s, the rate of new business formation in Canada has dropped by nearly 50 per cent and remains at historically low levels. That four-decade decline is a structural problem, not a cyclical blip. Successive federal and provincial governments have presided over the slow erosion of the conditions that once made Canada a place where entrepreneurs could take risks and expect a fair return on their ambition. What this report confirms is that the erosion has now become a collapse.
The CFIB is equally blunt about which sectors are bearing the worst of it. The sentiment against starting or growing a business is most strongly felt in the hospitality, manufacturing, and transportation sectors. These are not fringe industries. They are the sectors that employ hundreds of thousands of Canadians, anchor small towns and urban neighbourhoods alike, and represent the kind of tangible, physical commerce that no amount of government grant programming can simply conjure back into existence once it disappears.
What is particularly striking about this report is the psychological dimension of the crisis. It is not just that fewer businesses are opening; it is that the people who know business ownership best are actively discouraging others from pursuing it. More than half of small business owners, 55 per cent, say they would not recommend starting a business right now. That figure is extraordinary. When entrepreneurs themselves have lost confidence in the system they built their lives around, the pipeline of future business owners does not just slow down: it dries up.
One in two business owners say they would not recommend starting a business in Canada today, citing financial risk, regulatory barriers, and doubts about long-term viability. When entrepreneurs themselves are reluctant to encourage new business creation, the pipeline of new firms weakens, risking a deeper and more persistent drought. This is the kind of feedback loop that does not reverse itself on its own. It requires decisive policy intervention, and it requires it now.
The reasons business owners cite for their despair are consistent and familiar, and that consistency is itself damning. High costs, tax and payroll pressures, complex rules, red tape, and ongoing labour challenges against a backdrop of persistent global uncertainty are all making entrepreneurship more difficult and less attractive. None of these factors appeared overnight. They have been identified, flagged, and reported on for years. The CFIB has brought them to the attention of governments at every level, and for years, the response has been incremental at best and cosmetic at worst.
The trust deficit between Canadian entrepreneurs and their governments is now quantified and on the record. Two-thirds of small firms said they feel unsupported by their provincial governments; only three per cent strongly believed their government had a clear vision for entrepreneurship, while 73 per cent are not confident in the federal government. Read those numbers again. Three per cent. That is not a communication problem between government and the small business community. That is a legitimacy problem.
Recent CFIB data show that at least 54 per cent of businesses identified government regulation and paperwork as major impediments. In 2024, businesses spent an average of 735 hours, the equivalent of 32 full working days, mired in red tape. For a small business owner working without a legal or compliance team, 32 days lost to bureaucracy is not a nuisance. It is a month of productivity, revenue, and competitive effort handed over to paperwork that generates nothing.
The trade war context cannot be ignored either. More than half of small business owners are discouraging entrepreneurship at this time because of financial risks, regulatory hurdles, trade concerns, and long-term uncertainty. The ongoing Canada-U.S. trade dispute has introduced a layer of unpredictability that is particularly brutal for small and medium-sized businesses, which lack the financial cushion of large corporations to absorb sudden cost shocks or market disruptions. While governments have announced support programs for trade-impacted industries, the CFIB data suggests those measures are not landing where they are needed most.
Brianna Solberg, CFIB’s director for the Prairies and the North, put the systemic failure into plain language that deserves to be heard in every legislature in this country. Many businesses say that the ambition is there and the entrepreneurial spirit is there, even compared to their American counterparts; but it is the environment to actually take the risk and start and maintain business confidence that does not exist here. She also highlighted a succession problem that compounds the crisis: in Canada, heavy capital gains taxes make it difficult to find someone to take a business over, and what is increasingly being observed is American companies coming in and buying up Canadian firms simply because they have the finances and the resources to do so. The result is not just fewer businesses; it is Canadian businesses absorbed into foreign ownership because domestic entrepreneurs cannot afford the handoff.
The stakes go well beyond the balance sheets of individual business owners. Small and medium businesses account for nearly 99 per cent of all employer businesses in Canada; they also contribute almost half of private sector GDP. When that sector shrinks, the entire economy shrinks with it. Tax revenues fall. Community investment dries up. Employment options narrow. The consequences are not abstract; they show up in declining main streets, reduced local services, and a weakening of the economic fabric that holds Canadian communities together.
CFIB policy analyst Joseph Falzata offered a straightforward formulation of the stakes: if Canada wants a more productive and competitive economy tomorrow, it needs more small businesses today. That logic is unassailable. A country that makes it structurally difficult to start, sustain, and transfer a business is a country that is choosing a less dynamic economic future, whether it acknowledges that choice or not.
Part 2 of the CFIB’s entrepreneurial drought report series, titled Fixing Canada’s Shrinking Business Landscape, is scheduled for release on April 28, 2026, and will provide practical recommendations for governments to help end Canada’s entrepreneurial drought. That second instalment will matter enormously. Diagnosing the problem is essential, but what Canadian entrepreneurs need is action: a federal and provincial agenda that treats small business creation not as a campaign talking point but as a foundational economic priority.
Canada’s economic foundation is crumbling, said Solberg. Governments need to stop papering over the cracks and refocus efforts on policies that genuinely improve the small business environment. For the entrepreneurs across this country who are watching their industries contract and wondering whether it is still worth the risk to keep going, that refocus cannot come soon enough. For full BNN Bloomberg coverage of the CFIB findings, the story continues to develop.
