Canada’s startup slowdown raises business concerns

Canada is experiencing a prolonged decline in business creation, raising concerns about the long-term vitality of the country’s entrepreneurial ecosystem and broader economic competitiveness.

New business formation has been weakening for decades. Since the mid-1980s, entry rates for businesses have fallen by nearly half, signalling a structural slowdown in entrepreneurial activity. The trend has become more pronounced in recent years, with closures now outpacing startups. In the third quarter of 2025, business exit rates reached 5.8 per cent while startup rates dropped to 4.9 per cent, marking one of the weakest readings in a decade outside the disruptions of the pandemic.

The implications extend beyond individual firms. Small and medium-sized enterprises account for more than 60 per cent of Canada’s private-sector employment, meaning a decline in new ventures affects a substantial share of the labour market. When fewer businesses are launched, the economy risks losing competition, innovation and local service providers that contribute to productivity and economic dynamism.

Small-business owners say rising operating costs, regulatory complexity and economic uncertainty are making it harder to launch and sustain companies. According to the Canadian Federation of Independent Business, many entrepreneurs feel policy attention has shifted away from smaller firms as governments emphasise large industrial investments and high-profile corporate projects.

Survey findings from the organisation reflect declining confidence among business owners. About two-thirds of respondents say they feel unsupported by government policy, while only a small minority believe policymakers have a clear vision for entrepreneurship. More than half of surveyed members say they would not recommend starting a business to the next generation.

At the same time, public policy has increasingly focused on attracting major corporate investments through subsidies, targeted incentives and sector-specific strategies. While such measures aim to strengthen industrial capacity, critics argue the emphasis risks overlooking the foundational role of smaller enterprises in economic growth.

The weakening pace of business formation suggests a broader shift in Canada’s economic landscape, raising questions about how future growth will be sustained if fewer entrepreneurs enter the market.