A Labour Day overview of Canadian business health
With this coming Monday being Labour Day, I started thinking about how businesses were faring now that the worst of the pandemic is (hopefully) behind us.
So I decided to check out the Canadian Chamber of Commerce’s latest Business Trends and Insights Report. This report, which the Chamber compiles every quarter, focuses on current issues affecting businesses in Canada.
The most recent report came out in July, for the 2nd quarter of this year. Not surprisingly, a lot of the issues facing businesses today are related to the pandemic.
I though I would share some of the highlights of the report with you, to give you an idea of how businesses across Canada are doing currently, and how they feel they will fare in Q3.
Highlights of “Canadian Business Trends and Insights Q2 2022”
There are clearly some business sectors that are still suffering from the initial closure of the economy—
travel, airlines, and hospitality come to mind immediately. With the pent-up demand for travel really hitting its stride these past few months, the headlines have been full of stories of lost luggage, long wait times, and lack of car rentals. These are all largely the result of trying to dramatically restart and ramp up service levels while facing labour shortages and covid-related health restrictions.
More troubling for the economy long term is the health of the small business sector. That’s because small businesses make up the vast majority of all businesses in Canada—over 95%. And 68% of all employment in the Canadian economy is in small businesses.
Recent studies found that a great many small businesses are still struggling with ongoing losses and high debt levels, all fueled by the pandemic. Large numbers of closures in the small business sector—the heart of the Canadian economy—will be a challenge to ongoing economic recovery.
The pandemic has changed the conversation about where work can take place. Before the pandemic, only about 4% of employees were working remotely. That number climbed to over 30% during the peak of disruption, but has now gone down to about 9%. Still, that’s significantly higher than before covid.
As our economy continues to evolve into a service-based and knowledge-based economy, accelerating the trend of the past five decades, more organizations are acknowledging that, for many people, work can be performed from “anywhere”.
Some companies have used the pandemic to toggle their whole companies to “work remotely” as the default, allowing them to dramatically reduce expensive real estate rentals. However, most companies are trying to balance the work-from-home desire of many employees by embracing a hybrid work model—a few days in the office and a few days working remotely.
Look for this to take several years to really work the kinks out. This will be a source of contention in workforce design and organizational development for a while yet.
We’ve already been hit with dramatic cost increases in many of our products. And, as the graph above shows, there are many organizations that are planning still further price rises in the next quarter.
What’s happening at the macro level is a series of major adjustments that are working their way through our global economy, driven by shifts in supply chain, raw input costs, and unusually large shifts in demand. All these are further exacerbated by the impact of war, continuing covid lockdowns, and other large disruptions to the status quo.
Once all of these disturbances have moved through the system, life will generally be more expensive than it was pre-pandemic. However, inflation, with aggressive interest rates set by the central banks, will probably be back under control within another 12-18 months.
The companies that have suffered the most are the smaller businesses, as this chart illustrates.
These are generally self-funded organizations and many business owners have had to dig into their own personal resources to keep their businesses alive during the past 2.5 years.
Unfortunately, over the next year many of these smaller businesses will probably close up shop permanently as exhausted, financially imperiled owners decide business survival is just too costly.
The impacts of the pandemic have unleashed a number of unusual challenges for the business sector.
While none of the ones listed here are unique to the pandemic, all of them occurring at the same time, and in many cases reinforcing the negative impacts of each other, is the new feature from the pandemic lockdowns and restarts.
For example, many companies are struggling with input cost increases AND transportation cost increases at the same time. In addition, they are having to rethink and reconfigure their supply chains while also struggling to hire and maintain a productive work force. All of this is making their businesses more expensive to operate, forcing them to —at least in part — push some of those costs onto their customers.
Under more normal conditions, this would be a surprisingly muted expectation, with only 14% of businesses expecting an increase in sales in the next quarter.
At this point in the pandemic recovery, it’s probably a big win for many companies if they can get back on their feet, continue to serve their customers, readjust their supply chain costs, and maintain their labour force.
In short, success today for many organizations will be just getting through the rest of the pandemic-induced shocks intact.
Planning for growth will be their next phase, and for a large number of companies that is still many quarters out as they continue to try to maintain operations in very choppy waters.
Those are just some of the highlights of the report. You can view the whole report by visiting Canadian Business Trends and Insights Q2 2022. It’s an interesting set of statistics that help us get a better feel for what is actually going on in Canadian business today.
Until next time,
Cheers,
Tim
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Information in this article is for general information and is not intended as professional advice.