Despite dire predictions, fewer than 5% of Toronto businesses have gone bust — but what happens when government aid is cut off?
Most businesses are hanging on.
That’s the gist of the most recent Toronto Employment Survey, released last week, which found a 4.5 per cent decline in GTA businesses in 2020. Not an insignificant number — it marks a loss of about 3,480 shops in one year — but the damage is less than was anticipated at the outset of the pandemic, when rows of shops were expected to go bust while neighbourhood shopping centres hollowed out.
High levels of government aid, low interest rates and payment deferrals by lenders have all helped keep businesses afloat in the past 14 months, experts say. Per Ontario’s fiscal watchdog, bankruptcy rates actually dropped by 24 per cent.
But the government says the coffers will dry up this summer. In the coming months, federal Finance Minister Chrystia Freeland says she will wind down most aid programs, including the Canadian Emergency Wage Subsidy and the Canadian Emergency Business Account, until the programs are eliminated in September.
After that, businesses are poised to face a survival-of-the-fittest test in a post-pandemic economy.
Nadine Devereux-Iacullo, who along with her husband Paolo Iacullo owns Capo Salerno, a small Italian menswear shop, thinks shoppers will eventually return to her brick-and-mortar shop near Yonge Street and Eglinton Avenue. She just doesn’t know when.
“Will they come back in the next few months? No way. There’s no way people are going to flock out to stores when they’re scared, when the cases haven’t subsided, when most people don’t have their second (vaccine) shots,” she said.
Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives, credits government aid for “helping businesses hang on until the economy can reopen ... And that’s kept bankruptcies down and prevented more businesses from closing.”
The federal government’s hope is that an economic rebound will offset businesses’ reliance on government aid. There’s plenty to suggest this wish will come true. Already, consumers have indicated a pent-up demand for outings when lockdowns lift. Pubs can expect to fill up. Concert venue will likely rebound. More than half of Canadian consumers plan to purchase new clothing once restrictions are relaxed, according to a recent survey from The NPD Group.
But businesses supported by pandemic-era loans will still have debt to repay and lost revenue to account for, despite the subsidies. On top of that, consumer habits have changed, and the vitality of a business could depend on the sector it’s in and the product it sells.
Bruce Winder, an independent retail analyst and author of the book “Retail Before, During and After COVID-19,” says the businesses that have found new competition in titans like Amazon could struggle in the post-pandemic world.
“Service providers such as Shopify and Amazon have seen tremendous growth in their web hosting and third-party marketplace sales,” noted Winder. “We will probably see this trend continue as both customers and businesses grow accustomed to the reach, value and convenience online shopping offers them.”
The shift toward online shopping is not new. But some lockdown policies have encouraged it. A recent decision by the Ontario government that banned non-essential items from brick-and-mortar stores like Dollarama has left would-be customers with few cheap options beyond Amazon or Ikea.