Small business confidence over the long term remained stable but low, according to the latest Canadian Federation of Independent Business (CFIB) Business Barometer®. The 12-month index gained 0.5 points, reaching 51.4 index points in January.
“Small business confidence seems to be better but there’s still a lot of uncertainty in the economy. For this time of year, the levels are still quite low,” said Andreea Bourgeois, Director of Economics at CFIB. “Many businesses will continue to struggle under pandemic debt and rising prices unless the government takes action.”
Shortages of skilled labour, albeit cooling off, continue to be the top limitation for nearly half (46%) of small businesses. Wage costs are above the historical average, causing cost constraint for 60% of firms, while borrowing costs are causing difficulties for 37% of businesses, more than half over the historical average for this indicator.
Among sectors, retail has posted the lowest optimism level over the long term (41.2) – this marks the seventh consecutive month of an index below 50.
Given these sentiments, it is no surprise that 94% of small businesses want the federal government to address rising prices as Parliament returns to session on Monday, according to a new CFIB survey. Other priorities small businesses want to see addressed include reducing the overall tax burden (92%), ensuring labour policies are reasonable for employers (90%) and helping employers deal with labour shortages (77%).
“We’re hearing from members who are concerned about their future and where the economy is headed as they continue to deal with pandemic debt, increasing taxes, inflation and labour shortage,” said Corinne Pohlmann, Senior Vice-President of National Affairs at CFIB. “These challenges are having a crippling effect on their revenues, ability to grow and mental wellbeing. Small businesses need some reprieve.”
CFIB has sent a letter to Members of Parliament ahead of their return to Parliament on Jan. 30, calling on the government to implement various fiscal relief measures to support small businesses, including introducing a targeted Employment Insurance (EI) premium credit for 2023. The credit would reduce premiums for eligible employers to the same amount their employees pay.
To help small businesses alleviate some of their financial pressure, CFIB recommends the federal government:
- Introduce a targeted Employment Insurance (EI) premium credit for 2023
- Increase the maximum threshold for the small business tax rate (e.g., to $600,000), and index it to inflation going forward
- Decrease the small business tax rate from 9% to 8%, at least for the next two years
- Work with the provinces to offset the costs of the 2023 increases in Canada Pension Plan premiums through a targeted credit for small businesses
“Given all the challenges small businesses are facing, CFIB is calling on the government to help mitigate the impact of economic pressures on small firms,” Pohlmann concluded. “Give them some time and room to breathe and get back on their feet.”