Report Warns Canada Is Facing an Entrepreneurial Drought

By Tahani Elghazaly
Published April 17, 2026

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Canada’s small business sector is showing troubling signs of strain, with more businesses closing than opening for six consecutive quarters, according to new research from the Canadian Federation of Independent Business.

The CFIB describes the trend as an “entrepreneurial drought,” meaning a sustained period in which business exits outpace new business entries. The imbalance began in early 2024 and widened through 2025, raising concerns about Canada’s ability to renew its business base and support future job creation.

The report points to more than just business openings and closures. High operating costs, taxes, red tape, labour shortages, and economic uncertainty are making entrepreneurship harder and less attractive for many Canadians.

According to the CFIB, 55% of small business owners say they would not recommend starting a business right now. That figure highlights a deep level of concern in a sector that forms a major part of Canada’s economy and supports communities across the country.

Ontario is facing a particularly sharp challenge. The CFIB says business exit rates in the province reached 6.7% in the second quarter of 2025, while entry rates fell to 5.1% in the fourth quarter of 2025. Nationally, Canada’s exit rate reached 5.6%, while the entry rate fell to 4.8%, marking one of the weakest periods for new business activity outside the pandemic.

The organization is calling on governments to lower the cost of doing business, reduce administrative burdens, simplify regulations, and respond more effectively to labour challenges. A second part of the CFIB report, expected on April 28, 2026, is set to outline recommendations for governments on how to revive entrepreneurship in Canada.

The warning carries a direct cost-of-living angle. When small businesses disappear, the impact can reach beyond business owners. It may affect jobs, local services, prices, and the vitality of main streets in Canadian communities.