Extended lockdowns will put thousands of entrepreneurs out of business, warns Dan Kelly, President and CEO of the Canadian Federation of Independent Business.
A survey released Monday by the CFIB said one-third of Ontario businesses report they will not survive the second lockdown extending into January, adding that the Ontario government’s decision to extend and expand lockdowns across the province is another big hit in a long line of crushing blows to small business owners.
CFIB Reports 1/3 of Ontario Businesses Will Not Survive 2nd Lockdown
“[The] announcement guarantees the demise of thousands upon thousands of Ontario’s small businesses,” said Kelly. “The government should have used this as an opportunity to fine-tune existing restrictions based on the data, instead of expanding this blunt measure to additional regions of the province. Workers are going to lose their jobs. Business owners and their families will see their dreams crushed and their homes lost to the banks.
“Our original estimate was between 55,000 and 220,000 permanent business closures as a result of COVID-19 (in Canada). We’re re-doing that estimate right now because the second wave was not factored in and the second round of shut downs was not factored into those discussions. We’re hoping to have some new numbers out early in the New Year with an updated estimate on the number of business closures.
“What I can tell you is the data from Ontario suggest that a third of businesses will not survive a second lockdown. They report that they are at risk of permanent bankruptcy which of course on any measure is tens of thousands if not hundreds of thousands of businesses. This is deeply worrisome. I don’t see any pathway where we’re going to have fewer than 100,000 businesses closed across Canada as a result of the second wave. Of course lockdowns are not just here in Ontario. They’re now spreading right across the country in different sectors and different provinces doing it differently. But we’re likely to see a bleeding of independent businesses especially those with storefronts like we’ve just never seen. Main street locations that are going to be empty likely for years because there aren’t going to be the normal number of new entrants into the business community that would typically take their place.”
The Provincewide Shutdown will go into effect as of Saturday, December 26 at 12:01 a.m. It was last until January 23 for all regions in southern Ontario. The shutdown prohibits in-person shopping in most retail settings — curbside pickup and delivery can continue. Discount and big box retailers selling groceries will be limited to 25 percent capacity for in-store shopping. Supermarkets, grocery stores, and similar stores that primarily sell food, as well as pharmacies, will continue to operate at 50 percent capacity for in-store shopping.
The shutdown also prohibits indoor and outdoor dining. Restaurants, bars, and other food or drink establishments will be permitted to operate by take out, drive-through, and delivery only.
“Ontario has now expanded the most anti-small business lockdown measure in the country. No other province in Canada closes small businesses while allowing big-box stores to sell similar goods in-store. Our members are dumbfounded as to why their government continues to feel that it is safer to buy a book, bracelet or pair of shoes at Walmart or Costco than to buy the same items at their quiet, local independent retailer,” said Ryan Mallough, CFIB’s director of provincial affairs for Ontario. “The government has consistently chosen big box over small business throughout the pandemic. Today’s move puts a bow on an even merrier Christmas for Walmart and Costco at the expense of Ontario’s small retailers.”
Bruce Winder, Author of RETAIL Before, During & After COVID-19 and President of Bruce Winder Retail, said the future of independent businesses will be uncertain at the individual company level over the next one to two years.
“The sector will include much in the way of bankruptcies and liquidations but will also spawn a new breed of entrepreneurs with updated business models designed to thrive in this new abnormal. Industry ‘churn’, that is, the number of companies departing the industry plus the number of companies entering the industry will be high. Why? Because lockdowns often favour large chains who carry essential items and punish small to medium sized retailers that often don’t,” he said.
“Some independents will make it through to the other side, albeit with too much debt and with a reduced footprint. Some will retreat to e-commerce as they lose the ability to fund a bricks and mortar store. Others will declare bankruptcy as liabilities and almost zero cash flow will leave them no choice. Some will thrive as they were fortunate enough to win the lottery of carrying essential products or happen to be in a particular product category that soared in sales during the pandemic. New independents will emerge as entrepreneurs use COVID-19 to fill a gap in the market or offer a new in-demand service.”
He said a vaccine will improve business for independent retailers, eventually.
“As the vaccine makes its way through Canada, one can assume that eventually governments will feel comfortable easing lockdowns. Realistically though, it may be fall of 2021 before enough of the population is inoculated that both essential and non-essential retail is set free. Will independents be able to survive during this dark time? Will government subsidies be enough? Will online shopping and curbside pick-up and delivery make up enough sales to keep independents afloat? Will lenders and landlords have the patience to help them get through to the other side? It is like treading water in an ocean waiting for the lifeboat to arrive,” added Winder.
Experts Say COVID-19 Ramifications Will Still be Felt in 2022
And he said the ramifications of the virus and its impact will continue to be felt into 2022.
“Some of the things I discuss in my book Retail Before, During & After COVID-19 talk to this. We will see differences across many fronts. Income and wealth disparity will grow. Online shopping will be considerably higher than pre-pandemic levels. Retail will consolidate. More work will be done through the gig economy. Demand for products and services will change as citizens work from home more. Society will party hard and indulge themselves on many of the things they missed out on during 2020 and 2021. But there will also be a sense of caution for many as they subconsciously or consciously prepare for the next pandemic. Many people will continue to wear masks, more people will save money for a rainy day,” explained Winder.
“I think you will see some people leave entrepreneurship and try and get a 9 to 5 job, worn and frayed from the stress of trying to keep their business alive. But a far greater number of people will see this time as an opportunity. An opportunity to work for themselves and carve out a sustainable niche in the market. Some will be nudged in that direction based on downsizing and layoffs. Others will see this as the best time to pursue a lifelong dream. Some may choose to start online and only add a bricks and mortar store once they determine if their new venture is profitable. Entrepreneurship will never die. It will continue to thrive in a world that has changed as a result of COVID-19. New and exciting businesses will come out of this era.”
Diane J. Brisebois, President and CEO of the Retail Council of Canada, said the latest lockdown will definitely be the last nail in the coffin for many small retailers in Ontario.
“Unless there are substantial programs that are going to be helping them in relation to all of their overhead expenses which they have to carry regardless, these businesses won’t be able to make it, keeping in mind that southern Ontario with the lockdown has been in place for a couple of weeks now and it appears they are talking now an additional month. This is unsustainable,” said Brisebois.
“Because of the different restrictions and mixed messages and the lack of predictability that does take the wind out of the sales of an entrepreneur. So when you’re an entrepreneur you’re putting everything on the line. And if you think of retail entrepreneurs, especially the smaller ones but not exclusively, they mortgage their house, they mortgage everything for their business. This is definitely impacting those entrepreneurs that may be looking at having to close their businesses and it will make them hesitate to jump in again.
“I’m talking to our small merchants every day. Our helpline talks to them every day. And they’re just deflated. They’re borderline crying every time we’re talking to them and they are just so absolutely frustrated because they feel that they’ve become collateral damage and yet they have done everything to keep everybody safe and so this really just kicks your get up and go spirit. It really does.”
Kelly said he believes it will be awhile before people are courageous enough to take that first step towards entrepreneurship. Many of them will be seeking after COVID the security of a white collar job that could be done from home.
Certain types of businesses will be looked at for awhile as being super risky such as hospitality, service based and bricks and mortar retail. But Kelly said there has been a drive in recent years towards self employment and entrepreneurship and more and more young people want that as part of their lives.
“There will be two forces running against each other for a period of time. One that people will be looking in the short term for security and avoiding what is perceived as riskier businesses that were shut down during the pandemic. The other towards entrepreneurship and away from traditional employment. It’s too early to know which one is going to win out but I would put money on the power of entrepreneurship as a good long-term prospect. I think that over time people will start to return to things that they thought were important and wish to set up businesses of their own.”
On Monday, the Ontario government also announced the Ontario Small Business Support Grant which starts at $10,000 for all eligible businesses with the grant providing businesses with dollar for dollar funding to a maximum of $20,000 to help cover decreased revenue expected as a result of the provincewide shutdown. The businesses must demonstrate they experienced a revenue decline of at least 20 percent when comparing monthly revenue in April 2019 and April 2020. This time period was selected because it reflects the impact of the public health measures in spring 2020, and as such provides a representation of the possible impact of these latest measures on small businesses, according to the government.
“Today’s grant announcement is a step in the right direction, but the province must open its wallet even more to help small businesses make it through the lockdown period,” said Kelly. “Let’s not forget that the government chose to close small businesses, so they cannot be expected to survive without full economic support. Nothing short of 100 per cent support for affected businesses will get them to the other side of COVID-19.”
The CFIB is recommending that the Ontario government:
- Expand small business support to: immediately top up the federal Canada Emergency Rent Subsidy (CERS) to up to 100 per cent for businesses in lockdown zones and immediately top up the federal Canada Emergency Wage Subsidy (CEWS) to up to 100 per cent for businesses in lockdown zones;
- Expand eligibility for the Ontario PPE grant to all businesses, regardless of size or sector, and substantially increase the value from the current $1,000; and
- Increase funding to the $600-million program for energy and property taxes to reflect the additional volume of businesses in lockdown.
If politicians weren’t so politically correct, they would sue the Chinese government on behalf of their citizens and attempt to receive damages for the loss of lives, businesses, etc.