High costs, red tape, labour challenges and never-ending uncertainty discouraging the next generation of entrepreneurs
Charlottetown, 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.
“Small businesses on PEI are feeling this pressure firsthand. When costs keep rising, rules keep piling up, and uncertainty becomes the norm, fewer Islanders are willing to take the risk of starting a business,” said Frédéric Gionet, Director at CFIB. “If we want a stronger, more competitive economy here at home, we need to make it easier, not harder, for entrepreneurs to get started and grow. There are many bright minds with great ideas that would like to start a business, but some are being discouraged to make that pivotal decision.”
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.
“Small businesses remain a critically important component of Prince Edward Island’s economy, but right now many owners are questioning whether the environment is still worth the effort,” added Gionet. “When more than half of business owners wouldn’t recommend entrepreneurship, that’s a serious warning sign. Governments need to refocus on lowering costs, reducing red tape, and creating the conditions for small businesses to succeed.”
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.
Dariya Baiguzhiyeva, CFIB
647-464-2814
public.affairs@cfib.ca
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 over 900 in Prince Edward Island. 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.