In this video interview, Kayode Southwood, Senior Policy Analyst with the Canadian Federation of Independent Business, discusses Canada’s growing entrepreneurial drought.
PRESS RELEASE
Canada’s economic foundation is crumbling as business closures in Canada have been outpacing new business starts for six consecutive quarters. With Canada facing an entrepreneurial drought, governments must act to reverse this trend and fix Canada’s shrinking business landscape, says the Canadian Federation of Independent Business (CFIB).
As seen in CFIB’s Canada’s Entrepreneurial Drought, Part 1: The Shrinking Business Landscape report, 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.
Today, CFIB is releasing Part 2 of the report series, Canada’s Entrepreneurial Drought, Part 2: Fixing Canada’s Shrinking Business Landscape, which outlines practical reforms to reverse the drought and improve Canada’s business environment.
“Tomorrow’s federal spring economic statement is an opportunity for the federal government to address Canada’s entrepreneurial drought and restore small business confidence,” said Michelle Auger, CFIB director of trade and marketplace competitiveness. “Governments have spent years prioritizing big business needs, while small firms have been largely ignored. Canada cannot afford to keep losing more businesses than it gains, it’s time for all governments to put small businesses first and reverse the entrepreneurial drought.”
CFIB identified three priority areas of action to fix Canada’s entrepreneurial drought: reducing the cost of doing business, cutting red tape, and responding to the ongoing transformation of Canada’s labour market.
Some key reforms for governments include:
Reducing the costs of doing business:
- Reduce the federal small business corporate tax rate (SBCTR) from 9% to 6%; and
- 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.
- Make financing more accessible and affordable.
- Create a level playing field and ensure government programs and procurement processes are accessible to small firms.
Cutting red tape and reducing internal trade barriers:
- 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.
Addressing labour market challenges and improving business succession:
- 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.
- 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.”
Visit cfib.ca/drought for more information.
About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small and medium-sized businesses with 103,000 members across every industry and region. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.
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, 2025 and 2026.
About Us
Canada’s Entrepreneur is the number one community media platform in Canada for entrepreneurs and business owners. Established in 2016, our podcast team has interviewed over 800 Canadian entrepreneurs from coast-to-coast. With hosts in each province, entrepreneurs have a local and national format to tell their stories, talk about their journey and provide inspiration for anyone starting their entrepreneurial journey and well- established founders.
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