As storm clouds gather over Canada’s economic landscape, small business owners across the nation are sounding increasingly dire warnings. Despite Ottawa’s reluctance to use the “R-word,” entrepreneurs on the front lines of the economy report conditions that mirror textbook recession indicators—declining sales, tightening profit margins, and growing uncertainty about the future.
“We’re absolutely in a recession, regardless of what government officials want to call it,” says Marielle Beauchamp, who owns a boutique retail shop in Kitchener, Ontario. “My sales are down 22% compared to last year, and I’ve had to reduce staff hours just to keep the lights on. Most of my fellow business owners are seeing the same pattern.”
The Canadian Federation of Independent Business (CFIB) released troubling data yesterday showing that 68% of small business owners report conditions consistent with recessionary environments, up from 52% just three months ago. Perhaps most concerning is the sharp decline in business confidence, with the CFIB’s Business Barometer Index falling to 42.6 in June—well below the 50-point mark that separates economic expansion from contraction.
Economic indicators paint a complex picture. While GDP figures have shown marginal growth of 0.2% in the first quarter of 2025, those statistics mask significant sectoral disparities. Construction, retail, and hospitality—sectors dominated by small businesses—have experienced sustained contractions for three consecutive quarters.
“Technical definitions of recession matter little to someone trying to make payroll,” explains Dr. Robert Chen, economist at the University of Toronto. “When we look beyond headline figures, we see clear recessionary conditions in segments of the economy where small businesses predominate.”
The current challenges stem from a perfect storm of factors. Interest rates remain elevated at 4.25% after the Bank of Canada’s incremental cuts proved more cautious than anticipated. Meanwhile, consumer spending has contracted as households grapple with persistent inflation in essential categories like food and housing, despite the headline inflation rate moderating to 3.2%.
In Vancouver, restaurant owner James Tran has watched his customer base dwindle. “People aren’t dining out like they used to. Our weekday business is down almost 40%. We’re surviving on weekend traffic, but barely breaking even most months,” Tran told CO24 Business.
The regional impact varies significantly. Alberta’s small businesses report somewhat better conditions, buoyed by relatively stronger energy sector performance. Meanwhile, Ontario and British Columbia are experiencing the sharpest downturns, with retail vacancy rates in some Toronto neighborhoods approaching 20%—levels not seen since the 2008 financial crisis.
Federal response to these concerns has been measured. Minister of Small Business Lena Thompson acknowledged challenges facing entrepreneurs but stopped short of confirming recession conditions. “We recognize that certain sectors are experiencing contractions, but the overall economic indicators suggest a period of slow growth rather than broad recession,” Thompson stated at a press conference in Ottawa yesterday.
This characterization frustrates many business advocates. “The government seems determined to avoid the word ‘recession’ while small businesses are closing their doors,” says Michael Desjardins, policy director at the Canadian Chamber of Commerce. “Whether we call it a recession or not, we need targeted relief measures now, not after thousands more businesses fail.”
Policy experts suggest several approaches that could provide immediate relief, including temporary GST/HST payment deferrals, expanded access to interest-free loans, and targeted relief for industries facing the steepest declines. However, with federal deficit concerns limiting fiscal flexibility, meaningful intervention remains uncertain.
For entrepreneurs like Sarah Matheson, who recently closed her Halifax bakery after eight years in business, the debate over terminology feels academic. “Call it whatever you want—recession, downturn, correction. The reality is I couldn’t keep losing money month after month. Twelve people lost their jobs when we closed, and that’s happening across Canada.”
As 2025 progresses, economists will continue debating whether Canada has formally entered recession. For small business owners already living the reality of economic contraction, the more pressing question remains: will policymakers acknowledge their struggles in time to implement meaningful support, or will thousands more entrepreneurs be forced to close their doors before economic conditions improve?
