More businesses in Canada have closed than opened for six consecutive quarters, according to a new report from the Canadian Federation of Independent Business (CFIB) released this week. 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 worst figures since the pandemic. The "entrepreneurial drought"—a sustained period of four or more quarters where business exits outpace new business entries—has been ongoing since early 2024. Perhaps most telling: more than half (55 per cent) of Canadian small and medium enterprises say they would not recommend starting a business at this time.

This isn't just a blip. 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. The CFIB report describes a crumbling economic foundation where ambitious people are being discouraged from taking risks. Two‑thirds of small firms surveyed said they feel unsupported by their provincial governments, with only three per cent saying they strongly believed their government had a clear vision for entrepreneurship. And 73 per cent are not confident in the federal government. When existing business owners tell potential entrepreneurs to stay away, that's a clear signal the environment has turned hostile.

What's killing Canada's entrepreneurial spirit? Businesses cited "high costs, tax and payroll pressures, complex rules, red tape, and ongoing labour challenges against a backdrop of persistent global uncertainty" as the biggest challenges facing them. Think about what it actually means to run a small business now: you're competing with bigger companies that have full legal and accounting departments, but you have to navigate the same maze of regulations on your own. In 2024, businesses spent an average of 735 hours (32 working days) mired in red tape—that's more than a month of working time spent on paperwork instead of serving customers or developing products. Add rising costs and you get a situation where the risk-reward calculation just doesn't make sense anymore.

The Canadian economy is losing businesses faster than it can create new ones, and the implications stretch beyond individual entrepreneurs. Fewer new businesses means less innovation, less competition, and fewer job opportunities. Canada is projected to have the lowest real GDP per capita growth among OECD members through 2060, averaging only 0.78 per cent per year—less than half the expected U.S. rate. The CFIB will release recommendations for fixing this mess later this month, but the core message is already clear: if governments don't make it easier and cheaper to start and run businesses, Canada's economic stagnation will only deepen.