Toronto, April 27, 2026 – Business closures in Ontario and Canada have outpaced new business starts for six consecutive quarters, threatening our economic foundation. Governments must act to reverse this disturbing trend and fix Canada’s shrinking business landscape, says the Canadian Federation of Independent Business (CFIB).
In Part 1 of CFIB’s two-part series (Canada’s Entrepreneurial Drought, Part 1: The Shrinking Business Landscape), CFIB outlined the growing imbalance between business creations and closures across the country.
Today, CFIB released Part 2 (Canada’s Entrepreneurial Drought, Part 2: Fixing Canada’s Shrinking Business Landscape), which includes practical changes to reverse the entrepreneurial drought and improve Canada’s business environment.
The entrepreneurial drought – a sustained period of four or more quarters where business exits outpace new business entries – has been ongoing since early 2024. While the overall trend of business creation in Ontario and Canada has been declining since the mid-1980s, openings had mostly outpaced business closures. That’s not the case anymore. In Q2 2025, exit rates in Ontario reached 6.7% (5.6% in Canada), while entry rates in Ontario fell to 5.1% (4.8% in Canada) in Q4 2025. This marks some of the highest closure rates and weakest startup activity outside the pandemic.
“Tomorrow's federal spring economic statement is an opportunity for the federal government to address Canada's entrepreneurial drought and restore small business confidence,” said Joseph Falzata, CFIB’s Ontario Policy Analyst. “It’s time for all governments to focus on fixing the entrepreneurial drought. We can’t afford to keep losing more businesses than we gain.”
Key CFIB recommendations to end Ontario’s and Canada’s entrepreneurial drought include:
Lower the costs of doing business
• Reduce the federal Small Business Tax Rate (SBTR) from 9% to 6% to amplify the positive impact of Ontario’s recent provincial reduction from 3.2% to 2.2%.
• Raise SBTR federal and provincial thresholds across Canada to at least $700,000 and index them to inflation.
• Make small business financing more accessible and affordable.
• Create a level playing field by ensuring government programs and procurement processes are accessible to small businesses.
Cut red tape and reduce internal trade barriers
• Ontario should continue measuring and publicly reporting on the province’s regulatory burden by Ministry in annual Burden Reduction Reports.
• Once Ontario’s 25% regulatory reduction target is met, the province should eliminate two regulations for every new one introduced (a “2 for 1” rule) to maintain regulatory health.
• Expand the Canadian Mutual Recognition Agreement (CMRA) to include food and alcohol, and ensure the CMRA and provincial legislation across Canada are applied consistently and transparently, with minimal carve-outs.
Address labour market challenges and improve business succession
• Create a new Ontario informal training tax credit for small businesses to acknowledge their extensive on-the-job training efforts, especially for young people in their first job.
• Bring back an Ontario Apprenticeship Training Tax Credit to allow small businesses to directly benefit from provincial training funding.
• Develop stronger partnerships with educational institutions.
• Increase awareness – particularly among young entrepreneurs – about the opportunities and advantages of purchasing an existing, established business.
• Allow small corporations to defer the tax on capital gains from the transfer of a business to the owner’s children.
“To stop the entrepreneurial drought, governments need to attract a steady downpour of new small businesses and provide a consistently warm economic climate to keep them and existing small businesses here,” said Julie Kwiecinski, CFIB’s Ontario Director of Provincial Affairs. “While Ontario’s actions to cut small business taxes, reduce red tape, remove internal trade barriers, and improve labour mobility will go a long way towards addressing this critical issue, the work of cultivating the province’s job creators never ends.”
Visit cfib.ca/drought for more information.
For media inquiries or interviews, please contact:
Dariya Baiguzhiyeva, CFIB
647-464-2814
public.affairs@cfib.ca
About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small- and medium-sized businesses with over 103,000 members across every industry and region, including 40,000 in Ontario. CFIB is dedicated to increasing business owners’ chances of success by driving policy change at all levels of government, providing expert advice and tools, and negotiating exclusive savings. Learn more at cfib.ca.