Canadian Business Closures Up Over 37% This Year, But Some Are Re-opening

The pandemic is taking its toll on businesses, but to what extent is still pretty much a mystery. Statistics Canada (Stat Can) data recently released, shows monthly store closures made a sharp decline in July. Store closures in this case are defined as businesses that had employment the previous month, but didn’t in the reported month. This leads to some tricky assessments, because many businesses were only temporarily closed. However, whether hundreds of thousands of businesses will fully reopen is still somewhat of a mystery.

Canadian Monthly Business Closures Down 34%

The number of Canadian businesses closing has fallen, according to Stat Can data. The agency estimates 36,513 businesses closed in July, down 3.73% from a month before. Compared to last year, this represents a 33.94% decline. That’s actually an unusually low number of closures, but this has to do with a pull forward effect. So many businesses closed earlier in the year, there may not have been as many to close during the most recent reporting period.

Canada Business Opening and Closings

The number of business openings and closings across Canada.
Source: Stat Can, Better Dwelling.

Looking at the numbers year-to-date, we see a much higher than usual number of business closures. There were 376,428 businesses closed from January to July, up 37.88% compared to the same period last year. That’s a massive increase, but like all things during the pandemic – the damage is going to be overstated.  

Half of Businesses That Closed In March and April Reopened

Stat Can found many of the businesses that closed in March and April have actually reopened since. Half of businesses, or more accurately 49.5%, have reopened by July 2020. The agency notes Ontario is the worst off, with only 43.3% of businesses having reopened – still a substantial number. This is really different from normal closures, which typically mean permanently shutting down. 

Looking at the net rate of opening, the difference between the number of businesses opened and closed – July was positive. In July, there were 15,745 more businesses that opened than closed across Canada. Year to date though, there were 86,702 businesses that closed than opened over the same period. That compares to a net increase of 15,745 during the same period last year. 

Getting a full read on the amount of permanent closures across Canada is extremely difficult at this time. While the numbers improved on the month, that was likely due to a pull-forward effect. The negative circumstances were so abrupt, it caused a much higher rate of failure. In other words, the improvement may be due to the astronomically high number of places that had already closed. Year-to-date gives us a better idea, but it won’t tell us how many of those businesses are only temporarily closed. That data won’t be available until the economy fully reopens again.

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  • Rob 2 years ago

    43.5% of Canadian GDP is created by small business and employ 70% of private sector. With the virus still out of control there’s a probable contraction for Q1. The 2021 story is about insolvency and lost jobs.

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