Statistics Canada has come out with “experimental estimates for business openings and closures for Canada, provinces and territories, census metropolitan areas, seasonally adjusted”. The data is through April 2020 so we are starting to see how Covid-19 is impacting the business community.
First a definition. Statistics Canada defines closing businesses are “businesses that transition from having at least one employee in the previous month to having no employees in the current month.” This doesn’t mean they are permanently closing. In addition, it is only available for the province and CMAs.
In the Moncton CMA, in a typical month, there are 117 business closures (going back to January 2015). In April 2020 there were 299 closures – or 2.5 times as many as normal. In Saint John, there are typically 98 closures and there were 251 in April 2020 – or 2.5 times as many as normal just like Moncton. Across the rest of the province, there are typically 480 closures in a normal month compared to 960 in April 2020 – only about double the increase in closures.
This is a first look at this of course. Moving forward it will be important to track this closely as there are thousands of businesses across the province that are trying to make a go of it with social distancing, higher costs and skiddish customers. How many of these can survive six months? 12 months? We shall see.
There is a general principle in this data too. Business closures are not necessarily a bad thing. In a typical month across Canada there are 38,000 business closures. The real issue is the ratio of business starts to closures.
In Moncton, for example, for every 1000 closures there are 1014 business openings – going back to 2015 (excluding April 2020). Roughly the same average monthly ratio of openings to closures in Halifax. Saint John has been slightly below 1 to 1. Across Canada the ratio is slightly above 1 business start to 1 business closure.
Interestingly, using this approach, Ontario does the best in terms of openings to closings. At least going back to 2015. Prince Edward Island is also interesting given its attraction of so many immigrant investors in recent years. Moncton is the highest ranking CMA on this list going back to 2015.
The statistics are pretty much what one would expect…and if one is an optimist one can hope that, considering market pressure, startups will replace those closures. In a pre-internet world, the market would correct itself, balancing supply and demand and adding a little growth. However, the pervasive influence of the internet is exploding in all directions. Customers are getting used to buying online—everything from a car to a meal to psychiatric help—delivered to your door on time and on budget. Unfortunately, at the moment, big is perceived as better. There will always be small local stores, but this acceleration in online buying is becoming a habit, and retail at all levels will ultimately adjust. Small local stores and even national chains will die, and the mortality rate is out of our control. Subsidies will delay some of it, but the snowball is growing, the hill is becoming steeper, and the momentum is irresistible. This economic disaster called COVID 19 will take the weak, as expected, but the real damage will come later because the market will have accelerated its shift to those mega online stores that bypass the local retail level. Of course, that prognostication assumes that smart people don’t find a way to make local viable using Amazon tactics on a local level. Everything is cyclical…big will become bad, small will become comfortably intimate. There is a point where the synergy of big disappears, or is not worth the sacrifice.