High costs, red tape, labour challenges and never-ending uncertainty discouraging the next generation of entrepreneurs
St. John’s, April 15, 2026 – More businesses in Canada have closed than opened for six consecutive quarters, and more than half (55%) of small business owners say they would not recommend starting a business right now, according to new research by the Canadian Federation of Independent Business (CFIB).
CFIB’s new report, Canada’s Entrepreneurial Drought, Part 1: The Shrinking Business Landscape, is the first in a two-part series examining the growing imbalance between business creation and closures across the country.
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 Canada has been declining since mid-1980s, openings had mostly outpaced business closures. That’s not the case anymore. In the second quarter of 2025, exit rates reached 5.6%, while entry rates fell to 4.8% in Q4 2025, marking some of the highest closure rates and weakest startup activity outside the pandemic.
“While governments continue to invest heavily in large corporations, small businesses on Main Street are being left to navigate rising costs and regulatory burden on their own. If Canada wants stronger productivity and competitiveness, it must ensure more small businesses can start, grow, and succeed today” said, Jonathan Galgay, CFIB’s Director of Legislative Affairs for Newfoundland and Labrador. “Supporting small businesses is fundamental to economic growth. That means aligning government action with small business realities by lowering taxes, reducing red tape, and creating the conditions for investment and entrepreneurship across the country.”
The challenges behind the entrepreneurial drought go beyond business entry and exit trends. Two‑thirds of small firms said they feel unsupported by their provincial governments, only 3% strongly believed their government had a clear vision for entrepreneurship, while 73% are not confident in the federal government. High costs, tax and payroll pressures, complex rules, red tape, and ongoing labour challenges against a backdrop of persistent global uncertainty, all make entrepreneurship more difficult and less attractive.
“Canada’s economic strength depends on a healthy small business sector, and right now that foundation is under strain. Governments need to move beyond short term fixes and focus on policies that genuinely improve the environment for entrepreneurs on the ground,” said Galgay.
“We should take this warning seriously. When a majority of small business owners say they would not recommend starting a business today, it signals that costs, complexity, and risk are discouraging ambition. That’s not sustainable if we want a more dynamic and competitive economy.”
Part 2 of CFIB’s entrepreneurial drought report series: “Fixing Canada’s Shrinking Business Landscape” will be released on April 28, 2026. Part 2 will provide practical recommendations for governments to help end Canada’s entrepreneurial drought.
Visit cfib.ca/drought for more information.
For media enquiries or interviews, please contact:
Jonathan Galgay, Director of Legislative Affairs, Newfoundland and Labrador
709-743-6069
Jonathan.galgay@cfib.ca
About CFIB
The Canadian Federation of Independent Business (CFIB) is Canada’s largest association of small- and medium-sized businesses with 103,000 members across every industry and region, including 1,700 in Newfoundland and Labrador. 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.
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