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Economic Viewpoint

Small Business is Big Business in Ontario - Positioning for Post Pandemic Prosperity

October 24, 2022
Jimmy Jean, Vice-President, Chief Economist and Strategist • Randall Bartlett, Senior Director of Canadian Economics
Marc Desormeaux, Principal Economist • Florence Jean-Jacobs, Principal Economist

Many  of  Ontario’s  small  businesses  emerged  battered  and  bruised  from  the  pandemic.  Client‑facing  sectors  with  a  lot  of  small  businesses, such as accommodation and food services, were particularly hard hit. Many businesses were forced to close. And those that made it through are more highly leveraged than in the past, resulting from the need to take on debt to pay rent and payroll during public‑health lockdowns and subsequent social‑distancing requirements. But these industries were also positioned to benefit from the economic resurgence that came from reopening.

There  was  a  downside  to  this  rapid  reopening,  however.  Labour  shortages  have become  acute,  with  Ontario  experiencing  one  of  the  highest job vacancy rates in the country. Global supply chains have also been in disarray, and high input prices and wage costs are forcing businesses of all sizes to adapt.

Some of these disruptions look to be easing but there are other storm clouds developing on the horizon. The Bank of Canada’s ferocious monetary policy tightening campaign has caused Ontario’s housing market to correct. The construction sector, home to many small businesses and a pandemic‑era outperformer, is also correcting as a result.

In this report, we take the pulse of Ontario’s small businesses. Which sectors are over the pandemic, and which ones are still suffering from it? As an economic slowdown is taking shape, which sectors look most vulnerable? How are businesses coping with labour shortages and high inflation? How are they realigning their supply chains in the face of an increasingly tense and complex geopolitical landscape? And how they are investing to decarbonize, to automate and to digitize? These are some of the questions we explore in our report. What we find is that while near-term challenges abound, Ontario’s economy also has many features that position the province and its small businesses for a prosperous future. But that will require them to step up the pace on several dimensions, and for that, they will need ongoing guidance, incentives and support.