What's behind the upswing in confidence?
Small businesses in Canada are showing renewed confidence in their future prospects, according to a recent report.
Overall, 86 per cent of Canadian small businesses feel more optimistic about the future of their operations, according to a study by Xero, an accounting software provider.
This figure surpasses the global average of 83 per cent.
Factors contributing to the upswing in small business confidence include:
- more work availability (43 per cent)
- increased sales (41 per cent)
- better cash flow (30 per cent).
Despite the Bank of Canada reducing interest rates seven times since June 2024, the Xero.report notes that 74 per cent of Canadian businesses have not yet observed a positive impact on sales from these cuts.
Even though many businesses expressed optimism early into Canada’s tariff dispute with the United States—according to Statistics Canada (StatCan)—more than three-quarters (76 per cent) of Canadian business leaders later started bracing for the worst and taking steps to prepare for a potential recession—data from KPMG suggest.
Rising costs still challenging Canadian business
On the downside, business sentiment is being affected by rising costs, with 52 per cent citing price increases as negatively impacting sales. Additionally, 77 per cent reported a decline in purchase volumes from existing customers, while 66 per cent noted difficulties in attracting new customers.
“If recent history has proved anything, it’s that Canadian businesses are resilient,” says Alan Price, Chief Operations Officer at Peninsula Group, as cited by Ryan, a government funding consultancy. “I have no doubt that with the right knowledge and preparation, Canadian businesses can and will make it through this period of transition and come out stronger.”
Meanwhile, Ryan notes that while 2025 presents a series of challenges for Canadian businesses, it also offers “numerous opportunities for growth and innovation”.
“By adopting strategic financial practices (such as accessing government funding), diversifying markets, and embracing workforce evolution, companies can not only navigate the current landscape but also position themselves for sustained success,” it says.
Canadian businesses grew increasingly pessimistic as the trade war initiated by U.S. President Donald Trump continues to impact the economy, according to a report from the Bank of Canada released in April.
