Active businesses in Canada decreasing in most industries: Statistics Canada

The year 2022 was marked by unprecedented successive declines in the number of active businesses. In fact, this was the first time since data became accessible that the overall number of active businesses did not increase for more than three consecutive months, reported Statistics Canada on Tuesday.

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“Since June, the number of active businesses has generally been decreasing in most industries. With the exception of real estate and rental and leasing, and health care and social assistance, the number of active businesses posted no or negative growth in at least four of the last seven months of 2022. The year was marked by a series of events that likely impacted businesses, including the Bank of Canada’s policy interest rate, which rose from 0.25 per cent in January to 4.25 per cent in December, Russia’s invasion of Ukraine in February, which caused the rise in global prices (International Monetary Fund, 2022), and the rate of consumer inflation, which, in June (+8.1 per cent), posted its largest year-over-year change since January 1983,” said the federal agency.

“The decrease in the number of active businesses in recent months is in line with businesses’ expectations over the last two quarters of 2022. In fact, evidence from the Canadian Survey on Business Conditions shows that businesses were expecting challenges related to supply chains, inflation, cost of inputs, transportation costs and hiring and retention over both the third and the fourth quarters. Furthermore, according to the Bank of Canada’s business outlook survey (BOS), business sentiment continued to weaken in the fourth quarter. The BOS business confidence indicator in the fourth quarter was lower than its 10-year average. In addition, business insolvency filings rose sharply in 2022 as supply chain challenges, inflationary pressures and labour-related obstacles affected many businesses.”

In December, StatsCan said, the number of active businesses did not increase for the sixth consecutive month. The contraction of the number of active businesses in December (-0.3 per cent; -2,374) was mainly driven by the slight decrease in the business opening rate, from 4.5 per cent in November to 4.4 per cent in December. It said the business opening rate was 0.3 percentage points below its 2015-to-2019 historical average. The decrease in the business opening rate in December 2022 was due to the decline in the reopening rate from 2.8 per cent to 2.7 per cent, as the entry rate remained at 1.7 per cent. The business closure rate held relatively steady at 4.6 per cent, equal to its historical average.

“The number of active businesses decreased or remained relatively unchanged in all industries in December. Professional, scientific and technical services (-0.4 per cent growth rate; -486 change in active businesses) drove the decline, followed by construction (-0.3 per cent; -421) and other services (except public administration) (-0.5 per cent; -323),” said the report.

“In December, the decrease in the number of active businesses was widespread across provinces and territories. Ontario (-0.2 per cent growth rate; -657 change in active businesses) and British Columbia (-0.3 per cent; -518) led the decline, followed by Alberta (-0.2 per cent; -272) and Quebec (-0.1 per cent; -211). The overall decrease in the number of active businesses in the second half of 2022 was also widespread across provinces and territories.”