Despite recent strength in the economy and signs of pent-up consumer demand, many businesses remain concerned about their survival, according to a new survey from Statistics Canada.
While recent economic data suggests that output has recovered to 97% of where it was before the Covid-19 pandemic, businesses remain concerned about their profitability in the short term, StatsCan reported.
The latest edition of the agency’s survey on business conditions, which was carried out from mid-January to mid-February, found that over two-fifths of businesses (41.8%) expect their profitability to decrease over the next three months, and almost one-third expect their sales will decrease.
For the hard hit accommodation and food services sector, well over half (56.4%) expect their profits to decline in the next three months.
“Businesses are concerned with future survival and expect to face a variety of obstacles in the short term,” StatsCan said.
Those obstacles include a lack of demand (29.2%) and volatile demand (31.4%), the survey found.
Additionally, 25.5% of firms pointed to the rising cost of inputs, maintaining sufficient cash flow to be obstacles in the months ahead. Other concerns for firms are managing debt (24.2%) and retaining skilled employees (24.1%).
Amid these concerns, the survey found that over half (51.3%) of respondents didn’t know how long they could continue to operate at their current revenue and expenditure levels before considering closing down or filing for bankruptcy.
StatsCan said 10.3% of businesses reported they have less than 12 months under current conditions.
In the accommodation and food services sector, 24.9% said they have less than 12 months to survive, and this was similar in the arts, entertainment and recreation sector (23.3%), it noted.
StatsCan also reported that 21.3% of businesses said they will have to consider layoffs in the next 12 months, and almost half (46.4%) aren’t sure how long they can continue before considering layoffs.
While most businesses see harder times ahead, StatsCan also found that 8.3% expect their profitability to increase in the next three months, most notably in the wholesale (13.3%) and retail trade (12.8%) sectors.