Wave of Business Closures to Hit Canada Despite Government Help

(Bloomberg) -- Tens of thousands of Canadian businesses will be forced to shut permanently because they won’t be able to weather the effects of social distancing measures, according to the head of a lobby group.

The government of Prime Minister Justin Trudeau took too long to roll out emergency support programs and as a result, many companies won’t survive, says Dan Kelly, president at the Canadian Federation of Independent Business. A survey of CFIB members shows 80% of small and medium firms are closed or operating at reduced capacity because of the pandemic, meaning only 20% are fully operational.

“Even in the optimistic scenario with full utilization of all of these support programs, I still see no scenario under which there are not tens of thousands of permanent business closures,” Kelly said Wednesday by phone from Toronto.

The federal government has stepped up aid to businesses, introducing measures such as a 75% wage subsidy and C$40,000 loans, and a rent relief program is expected soon. But the measures weren’t announced immediately after the closure of non-essential businesses, and the rent and wage subsidy programs aren’t yet putting money in the bank. The government said it will open applications for the wage subsidy on Monday.

Relief on rent and wages may not come soon enough, forcing layoffs and requiring more Canadians to lean on the government’s income support program, according to Don Drummond, former chief economist at Toronto-Dominion Bank and a fellow at Queen’s University in Kingston, Ontario.

“The bulk of the support may have to be handled by the emergency relief program and that’s definitely second-best because that breaks the employer-employee relationship,” Drummond said Wednesday in a television interview with BNN Bloomberg.

Take ‘Months’

Almost 7 million Canadians, or about a third of the labor force, have applied for the Canada Emergency Response Benefit, which provides those who have lost work from Covid-19 with C$2,000 ($1,409) a month.

Many companies let employees go before the wage subsidy was announced, so it will be harder for them to find workers again once the recovery starts, Kelly said. “It’s going to take us months to put everybody back together as we come out of this.”

And if businesses do re-open in the near future, Kelly worries some CERB recipients may opt to continue receiving federal money instead of returning to work.

Companies should keep employees on payrolls, or bring previously laid-off workers back, according to Hassan Yussuff, President of the Canadian Labour Congress.

“It doesn’t cost employers anything to keep employees on the payroll instead of laying them off, so they need to be bringing people back,” Yussuff said. “This is a very difficult time so workers don’t need to have the added stress of looking for a job when this is all over.”

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