Canadian small businesses are continuing to navigate an uncertain economic environment, with consumer demand and rising costs posing significant challenges, according to the president and CEO of the Canadian Federation of Independent Business.
Dan Kelly said 2025 was a difficult year for small firms across sectors and regions, with fluctuating sales and unpredictable market conditions becoming the “new normal.” While business confidence showed some improvement late last year, Kelly stressed that uncertainty remains a defining factor in decision-making for many business owners.
Dan Kelly
A primary concern is weak consumer spending, particularly in retail, hospitality and restaurant sectors. Kelly noted that while employment levels remain relatively stable, uncertainty surrounding the Canada–U.S. relationship and lingering trade tensions have made Canadians more cautious with their purchases.
Costs continue to weigh heavily on small enterprises. Taxes and regulatory burdens remain high compared with U.S. competitors, while insurance costs show little sign of easing. Although some provincial and federal governments have introduced modest tax relief and scrapped certain planned increases, Kelly said more concrete action is needed to support businesses.
Small firms are adapting through investment in technology and workforce development, including adoption of artificial intelligence tools to improve efficiency and customer service. However, challenges remain in attracting skilled labor, particularly given recent restrictions on temporary foreign workers.
Kelly emphasized that the health of the small business sector depends on both a return of consumer spending and government follow-through on policy commitments, including infrastructure and trade improvements.
“Small businesses are resilient, but they need a stable environment and predictable costs to thrive,” Kelly said.
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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