More businesses have been closing than opening in Canada, according to CFIB
More businesses in Canada have closed than opened for six consecutive quarters, and more than half (55%) of small business owners say they would not recommend starting a business right now, according to new research by the Canadian Federation of Independent Business (CFIB).
CFIB’s new report, 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 entrepreneurial drought, a sustained period of four or more quarters where business exits outpace new business entries, has been ongoing since early 2024. While the overall trend of business creation in Canada has been declining since mid-1980s, openings had mostly outpaced business closures. That’s not the case anymore. 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.
“While governments continue to invest heavily in large corporations, small businesses on Main Street are being left to navigate rising costs and regulatory burden on their own. If Canada wants stronger productivity and competitiveness, it must ensure more small businesses can start, grow, and succeed today,” says, Jonathan Galgay, CFIB’s Director of Legislative Affairs for Newfoundland and Labrador. “Supporting small businesses is fundamental to economic growth. That means aligning government action with small business realities by lowering taxes, reducing red tape, and creating the conditions for investment and entrepreneurship across the country.”
According to CFIB, two‑thirds of small firms said they feel unsupported by their provincial governments, only 3% strongly believed their government had a clear vision for entrepreneurship, while 73% are not confident in the federal government. High costs, tax and payroll pressures, complex rules, red tape, and ongoing labour challenges against a backdrop of persistent global uncertainty, all make entrepreneurship more difficult and less attractive.
“We should take this warning seriously,” says Galgay. “When a majority of small business owners say they would not recommend starting a business today, it signals that costs, complexity, and risk are discouraging ambition. That’s not sustainable if we want a more dynamic and competitive economy.”
Part 2 of CFIB’s entrepreneurial drought report series: “Fixing Canada’s Shrinking Business Landscape” will be released on April 28, 2026. Part 2 will provide practical recommendations for governments to help end Canada’s entrepreneurial drought.
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