Reopening Is No Quick Fix for Canadian Companies Hammered by Virus

(Bloomberg) -- The initial shock of the coronavirus shutdown has eased. Now comes an equally hard part for thousands of business owners: figuring out their next move as Canada crawls toward reopening its economy.

More than 76,000 companies applied for the Trudeau government’s 75% wage subsidy in three days, accessing a program that has promised more than C$70 billion ($50 billion) in aid. Businesses have received billions in interest-free loans backed by the government, and some will get help paying their rent.

But before they restart, companies face another unprecedented exercise. Even with all that government help, they must assess how much of their activity will resume and how many people they can afford to bring back.

With depleted finances, some are making calculations about whether they can survive if forced to operate for months at limited capacity or under distancing rules that limit contact with customers. They’re also looking ahead to when the debts come due.

About 40% of businesses say they could not remain open for more than three months -- if they can open at all -- amid social distancing, according to a joint survey of more than 13,000 companies by Statistics Canada and the Canadian Chamber of Commerce. The same survey showed 41% have laid off staff.

Provinces have begun to discuss their reopening plans, but a return to normal is likely months away. Covid-19 infections continue to rise, albeit at a slower rate; the country has more than 53,000 confirmed cases, with 82% of them in Ontario and Quebec.

Here’s how employers from Fredericton to Calgary are approaching the next phase.

Saskatchewan: A Hotel’s Half-Open Headache

The province of 1.2 million last week became Canada’s first to lay out a reopening strategy. That filled Ryan Urzada with hope and trepidation as he works through the head-spinning calculus of how to get his 200-room Atlas Hotel back in business.

Saskatchewan, like many provinces, is ramping back up in stages. Urzada, who had to let go of all but 15 of his 138 staff starting March 12, doesn’t expect to be able to reopen his restaurant, pub and water park until June at the earliest. Even then, capacity will probably be restricted until at least the fall.

He will need to bring back workers, but he can’t guarantee enough hours at his C$12 to C$13 hourly rate to compete with the certainty of an emergency benefit that pays the unemployed C$500 a week for up to 16 weeks.

“It’s good for their morale, and their mental well-being, and their bills,” Urzada said of the government benefit. “It is going to provide a bit of a challenge when it is time to call them back to work.”

Everything will come to a head around June 6. That’s when the wage subsidy program, which pays a maximum of C$847 per employee, is scheduled to run out. It’s also about the time he’ll have to decide whether to permanently cut jobs. That would mean having to pay out an “immense” bill for severance and vacation pay which could amount to about C$100,000, he said.

“It’s the first time in my life as entrepreneur and business owner that I’ve ever had to rely on the government to save my business and having that out of my hands is a very scary thought.”

Reopening Is No Quick Fix for Canadian Companies Hammered by Virus

New Brunswick: One Restaurant, Two Gigs

In the eastern province, which suffered no deaths from Covid-19 and hasn’t had a new case in 12 days, the government is starting to loosen restrictions. For Jennie Wilson and her chef husband, Peter Tompkins, that means their 40-seat Fredericton restaurant, called 11th mile, could start to reopen in two to four weeks.

The couple, who launched the modern Canadian cuisine eatery in 2017, temporarily closed and laid off their eight staff in mid-March. Wilson reckons she may be able to bring back two full-time employees at first to help run a pared-down operation, compliant with social distancing rules.

The restaurant is also likely to continue a curbside takeout offering that Wilson and her husband started recently “to keep our lips above the water.” The couple took a C$40,000, government-guaranteed loan from their bank while continuing to pay rent in full.

“As we get into the next few weeks and try to start running a business with about five tables in it, that there’s a wage subsidy will be a huge help to us,” Wilson said. “We’re all going to have to play our part to get the wheel turning, and for us that means employing people.”

Ontario: A Brewer Pivots, but Worries About the Bill

In Kingston, Ontario, a government loan and wage subsidies have helped beer maker Josh Hayter keep or re-hire 23 of his 30 employees and produce at full capacity, while his tap room remains closed.

Since Hayter spoke to Bloomberg a month ago, there’s also been a twist. The president of Spearhead Brewing Co. struck a deal to package DuPont hand sanitizers, a job that will occupy his staff for two to three weeks and suspend beer production.

Hayter doesn’t expect things to look normal upon reopening and is worried about how a second virus wave may affect the economic recovery. Another “looming disaster” is when taxes, which governments deferred, come due later this year, he said.

The government “will have to come up with a payment plan for that repayment, otherwise they’re going to put about 80% of small businesses out of business all at once,” he said.

Alberta: Oil Price is the Bigger Problem

In Calgary, Redcap & Truss Partner Chris Beaton said his company and many of its clients have tapped government loan and wage programs to help weather the crisis.

For the four-person firm, which provides advice on capital-raising and mergers and acquisitions, the main issue is not reopening. Many of the firm’s clients are in the oilfield services sector and have been able to keep working. The concern is oil prices that have plunged and forced Canadian energy companies to cancel at least C$7.5 billion in planned capital spending.

The virus “is seen as a crisis that will pass in the coming months, whereas there’s still some structural concern around on what’s going to happen with oil prices,” Beaton said. “Everybody realizes that hopefully we’re going to get a vaccine soon and that there’s going to be some new social norm for a period of time, but it’s oil prices and the broader economy that everyone’s worried about.”

©2020 Bloomberg L.P.

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