-- With Canada facing an "entrepreneurial drought," resulting in business closures having outpaced new business starts for six consecutive quarters, governments must act to reverse this trend and fix the country's shrinking business landscape, said the Canadian Federation of Independent Business (CFIB).
Business exits in Canada have outpaced new business entries since early 2024, and the problem seems to be getting worse. In the second quarter of 2025, exit rates reached 5.6%, while entry rates fell to 4.8% in Q4 2025, "marking some of the highest closure rates and weakest startup activity outside the pandemic", CFIB noted.
In a statement released on Monday, CFIB identifies three priority areas of action to fix this "entrepreneurial drought".
Firstly, reduce costs of doing business: the federal government should reducing the small business corporate tax rate (SBCTR) from 9% to 6%; provincial governments should permanently lower their SBCTRs to 0% by 2030; federal and provincial governments should raise SBCTR thresholds to at least $700,000 and index it to inflation; all governments must make financing "more accessible and affordable"; and should "create a level playing field" and ensure government programs and procurement processes are accessible to small firms.
Secondly, cut red tape and reduce internal trade barriers: governments should measure and publicly report the regulatory burden; eliminate two regulations for every new one introduced (a '2 for 1' rule) to cut red tape; streamline internal trade by expanding mutual recognition beyond its current scope to include food and alcohol and ensure the Canadian Mutual Recognition Agreement and provincial legislation are applied consistently and transparently, with minimal carve-outs.
Thirdly, addressing labor market challenges and improve business succession: governments must improve workforce quality through training incentives and stronger partnerships with educational institutions; Keep, protect and defend the Temporary Foreign Worker Program and consult the business community in advance of future reform; increase awareness, particularly among young entrepreneurs, about the opportunities and advantages of purchasing an existing business; and allow small corporations to defer the tax on capital gains from the transfer of a business to the owner's children.
"The entrepreneurial drought won't fix itself. Canada needs to give businesses clear reasons to start, stay and invest, yet current government policies are failing to inspire confidence among entrepreneurs," said Brianna Solberg, CFIB director for the Prairies and the North. "If governments are serious about Canada's economic strength, competitiveness, and productivity growth, they need to start reflecting this in their policies."