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Business confidence hitting COVID lows

It’s hardly a surprise, but it is official that business confidence has reached a grim low according to the 2020 Ontario Economic Report released by the The Ontario Chamber of Commerce in late January.

The report is largely based on the chamber’s Business Confidence Survey, which goes out to 60,000 members in 135 communities across the province.

“The current health and economic crisis have had a considerable impact on our economy. Only 21 per cent of businesses are confident in Ontario’s economic outlook – a historic low – reflecting the stark reality in which businesses continue to grapple with the financial and logistical challenges of operating under a pandemic,” said Rocco Rossi, president and CEO of the Ontario Chamber of Commerce.

The report also draws attention to the unpredictability that lies ahead for area businesses, and highlights the disproportionate impact the pandemic has had on small businesses and entrepreneurs as well as specific regions and sectors.

“Our small business members are the least confident in the province’s economy, as they continue to face unprecedented liquidity constraints, increased costs, the reduced revenues,” said Amy Kirkland, executive director of the 1000 Islands Gananoque Chamber of Commerce.

The report found that only 21 per cent of survey respondents expressed confidence in Ontario’s economic outlook, and fewer than half (48 per cent) of Ontario businesses are confident in the outlook for their own organization.

The majority of respondents (58 per cent) said their organization shrank between April and September 2020; while nearly half (47 per cent) said they let employees go, as a direct result of the pandemic.

The hardest hit sectors according to the report are predictably accommodation, food services, the arts, entertainment, recreation and retail. The hardest hit employees are women, lower income earners, racialized employees, new immigrants and youth.

According to Kirkland, the local chamber has worked hard to help all its members with accessing to every support available, through government and municipal programs.

The OCC’s report is not the first to sound the alarm and its findings are in line with bank economists’ findings and the Canadian Federation of Independent Business (CFIB).

“Near-term, many firms, already weakened by the first bout of the health crisis, will find it harder to survive the second wave. Based on a separate report by the CFIB, one-in-six small business owners are contemplating permanently closing. This is higher than CFIB’s 2020 estimate of one-in-seven,” wrote Ksenia Bushmeneva, an economist with TD Economics, in an analysis of the CFIB’s business confidence survey.

According to the CFIB, the near-term optimism, based on a three-month outlook, has plunged since last year, reflecting the very challenging operating environment that many small businesses are facing.

The combined lockdowns, curfews and movement restriction are having a negative impact on supply chains, which in turn have an impact on already-challenged sales at small retailers, according to TD Economics.

“The new year is off to a challenging start for small businesses on the back of ongoing, and in some cases tightening, government restrictions across provinces. This is weighing on the near-term outlook, particularly in provinces and industries facing the toughest measures,” said Bushmeneva.

Every region of the province has felt the impacts of this recession, though some more than others.

According to Daniel Safayeni, vice-president of policy at the OCC and the report’s co-author, support programs and pro-growth-policies will need to be targeted towards those sectors experiencing the most striking challenges.

So far the government has released a variety of programs to bolster small businesses through a variety of mechanisms such as the Canada Emergency Business Account, and The Regional Relief and Recovery Fund administered through local community futures development corporations.

Many of the programs available are offering interest free loans – but they’re still loans.

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“Many firms may be reaching a limit on their ability to layer on more debt. A Statistics Canada Survey on Business Conditions conducted through October showed that over 40 per cent of businesses could not take on any more debt,” said Bushmeneva.

Meanwhile, businesses’ priorities for governments as they embark on economic recovery efforts include enhancing access to capital, reforming business taxes, investing in broadband infrastructure and continuing to push the buy-local message, according to the findings of the OCC report.

“The prolonged natures of the crisis, rising case counts, and uncertainty around vaccine deployment timelines, have taken a toll on employers and Ontarians across the province. Yet, Ontario has a proven track-record of resilience and recovery. Our long-term prosperity will depend on all levels of government, business, chambers of commerce and boards of trade working together towards economic recovery,” said Rossi.
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