One-third of small businesses set to raise prices
By Adam FreillConstruction Financing
CFIB member companies expect Bank of Canada rate increase to hurt their business and force price increases.
The Canadian Federation of Independent Business (CFIB) is warning that the most recent rate increase by the Bank of Canada, the fifth this year, will take a heavy toll on small businesses. The organization says that seven in 10 small business owners expect interest rate hikes to have a negative impact on their operations, and a third plan to raise their prices by six per cent or more in the next 12 months.
Earlier this month, the Bank of Canada raised its benchmark interest rate by 75 basis points in an effort to curb inflation, bringing the policy rate to 3.25 per cent.
“While keeping inflation at reasonable levels is definitely an important policy goal, the rate increase comes at a time when 62 per cent of small businesses are still saddled with pandemic debt, for an average of $158,000,” said Simon Gaudreault, chief economist and vice-president of research at CFIB. “Doing business in Canada is becoming too costly. Rising costs, compounded with interest rate hikes and difficulties finding staff, are putting business owners in a tough spot.”
Nearly 80 per cent of small business owners raised their prices more than usual in the past year to compensate for rising costs and 81 per cent saying the federal government does not understand the cost pressures they face.
“This should sound the alarm for governments to take swift action and provide more cost relief,” added CFIB president Dan Kelly.
CFIB is urging governments to freeze planned federal tax hikes, including the 2022 increase in CPP, EI, carbon and liquor taxation, and reduce the provincial payroll tax burden, among other measures.
“As small firms are struggling to keep up with staggering increases on almost every line of their budget, governments must avoid imposing additional costs that would put the livelihood of small businesses at risk,” Kelly concluded.