A new publication from the Montreal Economic Institute (MEI) is raising red flags about the escalating regulatory burden faced by Canadian businesses, warning that unchecked government intervention is stifling entrepreneurship and weakening the country’s economic future.
“Regulation creep is a real thing, and Ottawa has been fuelling it for decades,” says Krystle Wittevrongel, director of research at the MEI and coauthor of the latest Viewpoint. “Regulations are passed but rarely reviewed, making it burdensome to run a business, or even too costly to get started.”
The report points to a staggering 37 per cent increase in federal regulatory requirements from 2006 to 2021, ballooning from 234,200 to 320,900. The economic toll? According to recent data from Statistics Canada, these added layers of red tape have shaved 1.7 percentage points off real GDP growth, 1.3 percentage points from employment growth, and 0.4 percentage points from labour productivity.
Krystle Wittevrongel
It’s a trend hitting Canada’s small businesses the hardest.
Data from the Canadian Federation of Independent Business cited in the report shows that firms with fewer than five employees are shelling out over $10,200 per employee in regulatory compliance costs in 2024. By contrast, larger firms with 100 or more employees pay just $1,400 per employee.
In total, Canadian businesses are spending 768 million hours annually on regulatory compliance—the equivalent of 394,000 full-time jobs. The economic cost in 2024 alone topped $51.5 billion.
Given this backdrop, it’s no surprise that entrepreneurship in Canada is trending downward. In 2000, three out of every 1,000 Canadians started a business. By 2022, that number had plummeted to just 1.3, representing a 57 per cent drop over two decades.
The regulatory drag is a big part of the story. According to Statistics Canada, if the federal government had simply kept regulations at their 2006 level, Canada would have seen 10 per cent more business start-ups in 2021.
Wittevrongel and her coauthors argue it’s time to apply a page from Canada’s own history to turn the tide. Drawing inspiration from the Chrétien government’s 1995 Program Review, the report suggests a similar exercise could be applied to streamline outdated, duplicative, or unnecessary regulations.
The Program Review, launched in the 1990s, cut federal spending by $12 billion over two years, a 9.7 per cent reduction, successfully restoring fiscal balance. A comparable audit of regulations, the MEI argues, could yield similar results in terms of economic revitalization.
To do so, the MEI recommends evaluating each regulation against six key questions:
- What is the purpose of the regulation?
- Does it serve the public interest?
- What is the role of the federal government and is its intervention necessary?
- What is the expected economic cost of the regulation?
- Is there a less costly or intrusive way to solve the problem the regulation seeks to address?
- Is there a net benefit?
The stakes couldn’t be higher. OECD projections indicate Canada is on track to record the lowest GDP per capita growth among advanced economies through 2060.
“Canada has just lived through a decade marked by weak growth, stagnant wages, and declining prosperity,” adds Wittevrongel. “If policymakers are serious about reversing this trend, they must start by asking whether existing regulations are doing more harm than good.”
The full MEI Viewpoint can be accessed here: https://www.iedm.org/wp-content/uploads/2025/05/viewpoint062025.pdf
The MEI is an independent public policy think tank with offices in Montreal, Ottawa, and Calgary. Through its publications, media appearances, and advisory services to policymakers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024 and 2025.
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