Entrepreneurship in Canada is stalled, with business exits outpacing business starts for six consecutive quarters, says a new report from the Canadian Federation of Independent Business (CFIB).
Since early 2024, business exits have consistently exceeded new entries, the report, entitled “The Shrinking Business Landscape,” said.
For example, in the second quarter of 2025, exit rates decreased slightly to 5.6%, based on Statistics Canada. Meanwhile, entry rates fell to 4.8% in the fourth quarter of 2025. These figures represent “some of the highest closure rates and weakest startup activity outside the pandemic,” the report said.
In the sector category of finance, insurance, real estate and leasing, the net change in business entries and exits was relatively flat after 2016, the report said. But since mid-2023, exits have increasingly outnumbered entries, with the net change reaching –1,636 last year.
The prolonged “entrepreneurial drought” threatens Canadian “innovation, competitiveness and business dynamism,” the report said.
Small and medium businesses account for nearly 99% of all employer businesses, CFIB noted. They also contribute almost half of private sector GDP, based on 2022 data from Innovation, Science and Economic Development Canada.
But, given factors such as regulatory barriers, financial risks, economic uncertainty and high taxes, more than half of small and medium business owners (55%) said they wouldn’t recommend starting a business today, according to CFIB research from October.
“We cannot afford to regulate ambition out of our economy,” Brianna Solberg, CFIB’s director for the Prairies and the North, said in a release. “When more than half of current small business owners are telling you they wouldn’t recommend starting a business, it’s time to listen.”
CFIB is urging the government to make small business a priority.
“That means reducing taxes, cutting red tape, and promoting investment and entrepreneurship across the country,” Michelle Auger, CFIB director of trade and marketplace competitiveness, said in the release.
The CFIB will release part two of the report later this month, with practical recommendations for the government to support business.
Recent CFIB data show that at least 54% of businesses identified government regulation and paperwork as major impediments. And in 2024, businesses spent an average of 735 hours (32 working days) mired in red tape, according to a separate CFIB report.
Within financial services, the government recently aimed to address regulatory red tape related to interprovincial trade by officially incorporating financial services into the Canadian Free Trade Agreement.
According to Statistics Canada, the sector category of finance, insurance, real estate and leasing accounted for about 11.8 % of internal trade in 2021 (the most recent breakdown available). This was second only to manufacturing, at about one-third.