In the fourth quarter of 2023, Canada’s real gross domestic product (GDP) remained relatively stable for the second consecutive month in August. Despite this, inflationary pressures persisted, registering a 3.1% year-over-year increase in October. Employment exhibited minimal change, but the unemployment rate rose to 5.7%, marking the fourth increase in six months.
Against this macroeconomic backdrop, Statistics Canada conducted the Canadian Survey on Business Conditions from October to early November 2023. This survey aimed to gather insights into the current business environment and expectations for the future. While certain businesses persevere in grappling with challenges, others find themselves less fortunate in the current economic landscape.
Cost-Related Challenges: Inflation
- 73.7% of businesses foresee cost-related obstacles, with 56.9% expecting challenges from rising inflation.
- Sectors like accommodation, food services, transportation, and wholesale trade are particularly concerned.
Input Costs and Debt
- 44.7% foresee challenges in rising input costs, including labor, capital, energy, and raw materials.
- 42.7% express concerns about rising interest rates and debt costs, impacting sectors like agriculture, construction, and transportation.
Impact of Interest Rates on Businesses
- 73.1% acknowledge some impact from interest rates, with 28.7% reporting a high level of impact.
- The cost of existing debt is identified as the most affected aspect by 31.0% of businesses, especially in real estate, agriculture, and transportation.
Labor-Related Expectations
- 40.3% anticipate labor-related obstacles, down from 47.7% in the previous quarter.
- Recruiting skilled employees remains a significant concern in sectors like accommodation, manufacturing, and healthcare.
CEBA Loan Repayment Expectations
- 51.5% of businesses received a repayable CEBA loan.
- 71.8% have not fully repaid, but 65.6% anticipate repayment by December 31, 2026.
Business Outlook: Steady Optimism
- 65.9% of businesses express optimism for the next 12 months, similar to the previous quarter.
- Stable expectations for increased sales, price adjustments, and wage growth across different sectors.
Business facing trouble? Contact a licensed insolvency trustee
When seeking solutions to financial challenges, businesses can explore two key options:
1) Business Proposals
For businesses encountering financial hardships, pursuing a business proposal with a licensed insolvency trustee (LIT) can be a strategic avenue. A business proposal involves negotiating with creditors to restructure debt and formulate a repayment plan. This collaborative process allows businesses to avoid bankruptcy while addressing financial challenges.
LITs play a crucial role in facilitating these negotiations, working with both businesses and creditors to reach mutually beneficial agreements. Through the implementation of a business proposal, companies can regain financial stability and continue operations with a more sustainable financial structure.
2) Bankruptcy
In more severe cases where financial recovery seems untenable, filing for bankruptcy becomes a last resort. Bankruptcy involves the orderly distribution of assets to creditors, providing a legal framework to discharge debts. While it signifies the end of the business in its current form, bankruptcy offers a fresh start for entrepreneurs and may be the most responsible course of action in certain circumstances.
Licensed insolvency trustees guide businesses through the bankruptcy process, ensuring compliance with legal requirements and facilitating an organized resolution. Though a challenging decision, declaring bankruptcy can pave the way for individuals to learn from the experience, rebuild, and potentially embark on new entrepreneurial endeavours in the future. Businesses facing such decisions should consult with a licensed insolvency trustee to explore the most suitable path forward and navigate the complexities of these financial challenges.
As businesses continue to tread cautiously, seeking adaptive strategies will be pivotal for sustained resilience and growth. For those facing significant financial challenges, seeking the assistance of licensed insolvency trustees becomes paramount. In these challenging times, it is crucial for businesses to not only weather the storm but emerge stronger, armed with adaptive strategies and a commitment to financial health.
