Today's discussion:

Business bankruptcies have soared. The bad news is many aren’t being replaced

The rate of new business creation in Canada is way (way!) down. Rather than trying to prevent or delay business failures, policymakers should focus on fostering new business creation. This shouldn't be done artificially through subsidies, but rather by removing barriers that hinder startups in the first place.

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Comments (14)

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The Hub Staff

Thank you for contributing to Hub Forum. If you are interested in seeing other analyses from Trevor, check out his interview with Sean Speer on inflation numbers: https://thehub.ca/2024-01-16/shaping-up-to-be-a-bumpy-landing-trevor-tombe-breaks-down-2023s-inflation-numbers/

25th January 2024 at 1:46 pm
Richard Courtemanche

Business owners and all Canadians should be screaming at their MPs. Can’t believe we can be so passive in watching our demise!

The state of governance of the nation is appalling and in dire straits, and no one in a position of authority is intervening, even collectively. Canadians are being hijacked by criminals.

25th January 2024 at 9:44 am
Stephen McClellan

Regarding the Federal Court decision on the invoking of the Emergencies Act, I am encouraged that it is possible to successfully push back against “Big Brother” and kudos to the Canadian Constitution Foundation, well worthy of our support.
As for Stone’s piece on birth rates and climate change, good piece of analysis. Sadly, the climate doomsday sayers are not interested facts and so they along with most of the mainstream media will continue to spin the apocalypse narrative.

25th January 2024 at 8:49 am
BobSt c.

While I generally agree with Trevor the closure trend is still worrisome. It is not black and white there are also a number of these closing businesses who had potential. As Trevor states, it is quite intimidating to open a new shop when facing government regulation and rules, rising business taxes, payroll tax and high cost borrowing. The other worrying aspect of closures and lack of new openings is that often, the benefactors are the large deep pocketed corporations. They shut down competition, they can afford to hire and purchase the resources they need unlike a start up. And these big guys have something most small guys don’t: friends in all levels of government

25th January 2024 at 8:30 am
Michael F

High cost of borrowing? Have you ever tried to get a loan as a small business? The big banks here won’t even look at you.

25th January 2024 at 12:05 pm
Greg Jackson

In my opinion, which is shared by many other entrepreneurs, the banking system in Canada is one of the main barriers impeding the growth of new businesses. The risk tolerance of Canadian banks is so low, that a new business cannot get enough lift (financially speaking) to carry them to the stage where a bank would even consider offering a line of credit. Someone wanting to start a new business must therefore be financially independent in order to begin the process. Essentially, in order to borrow money for your new business, you must first prove to some faceless arbiter “downtown” that you have three dollars for every dollar you wish to have available from them. Those same faceless people, who have zero knowledge of your business environment, will sit in judgement of your business plan. Oh, they may have that coveted MBA hanging on their wall, but they have never started or run a business. They are by nature, risk averse, so they would never bet on themselves. The banking environment is quite different, south of the border, which explains in part why the US economy is more resilient and also why people like me often exit Canada and take their good ideas with them.
My business partner and I have been in our current business for twenty years. During that time, we have been with the same bank. A couple of years ago, we secured the rights to a patented technology that while related to our business, involved a service offering with which we had no experience . Along came two young fellows, (both engineers) with years of experience in the field. We partnered with them to start a new business. Neither of them were in a position to contribute financially to the start-up, and in fact they could not afford to leave their current employment to work full-time in the business while supporting their families. To date, my partner and I have contributed $200K, to get the company to the point where we can apply for a line of credit. That said, our current bank asked my partner and me to secure the line for the new
business against our other company.
Our partners in the new business are in their late 30’s, early 40’s. Both wanted to start their own business. What would their chances have been, if they had to go it alone?

25th January 2024 at 10:26 am
Michael F

I completely agree with you about the Canadian banks being less than friendly to small business in Canada. In Canada small business owners know that they can’t turn to the banks for help unless they are willing to pledge personal assets to secure credit. The banks here only want to help when you don’t really need it. So hence was born the idea that you go to the bank for money when you don’t need it because one day it may be needed and they won’t give it to you then.

Where I disagree with you is your characterization of the US economy being more resilient. The US has gone through three fairly big economic shocks in the last 25 years alone while Canada for the most part (partly due to our conservative banks) avoided those events.

25th January 2024 at 12:14 pm
Greg Jackson

Michael, while Canada avoided the worst of the tech bubble, the 2008 financial meltdown, and the Silicon Bank debacle, the US economy rebounded and surpassed the growth in Canada’s economy. Much of that is driven by investment in small business. Our banking structure prevents the “lows” but also restricts the “highs”.
We need to deregulate the banking system in Canada to increase competition. The problem is structural.

25th January 2024 at 2:39 pm
Marinus Enden

ref: the police situations today: there was a time a short decade ago, that any citizen could walk into the local police office and speak with someone. Now the building are secured against potential threats. A few decades before that, police walked the beat in most cities. They often had a partner.
Dreams of the past and yes, a new approach is needed. If the police are afraid to venture out alone, what for the rest of us? It has become a them and us situation, where before we told our children to admire the law enforcer. I don’t have the answer but one is surely needed, and it will be complex. Certainly the sight of the single officer in a rolling fort, is not the appropriate response

25th January 2024 at 8:50 am
tonyleudy@hotmail.com

I think the CBC should be completely defunded. I don’t know anyone who uses it. Just let it end. Please.

25th January 2024 at 1:13 pm
Paul Attics

The low business start-up rate and the spread between it and the business shutdown rate is likely a symptom of a sputtering economy. However, the question is why?

Removing barriers (“easing regulatory burdens, liberalizing foreign investment, reforming business taxes, improving access to credit, and more”) may help (like a shot of adrenaline) but doesn’t doesn’t answer the why.

Perhaps these barriers are not the primary cause? Regardless, the primary cause(s) should be well understood before significant action is taken.

People struggling with the just the basics and broad societal “prosperity uncertainty” seem to be likely reasons that there are fewer start-ups. Other?

25th January 2024 at 8:38 am
Greg Jackson

From your post, I can reasonably infer that you yourself, are not an entrepreneur. Prosperity uncertainty is not something that would frighten most entrepreneurs. It goes with the territory. If you read my post, we started our company in the midst of the pandemic, in June of 2021.

25th January 2024 at 3:08 pm
Michael F

Paul Krugman in the NYT has done several pieces showing that in the US there is a disconnect between the reality of the economy and how some people ‘feel’ about the economy. Despite inflation coming down, historic low unemployment and a surging stock market conservative Americans still feel the economy is in rough shape. I think this phenomena isn’t solely a US one.

25th January 2024 at 12:19 pm
Norm Starr

“It would cost the feds 900 million to extend the repayment deadline for another year”
These federal losers piss away more than that to 3rd world shitholes for absolute moronic reasons.
Memories of the clown turning his back on veterans and taking a young girl (indigenous if I remember) to court and spending God knows how much rather than paying $1300. to fix her teeth.
Oh he’s not totally unhinged, then I dunno what unhinged is

25th January 2024 at 7:33 pm