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The coming revenue-to-debt tipping point for businesses: Canadian Chamber raises alarm on potential for wave of closures after COVID is beaten

The coming revenue-to-debt tipping point for businesses: Canadian Chamber raises alarm on potential for wave of closures after COVID is beaten

“Businesses in customer facing sectors that have made it to today, so close to reopening and herd immunity, face two grim realities: lower revenues for up to two years and an inability to take on more debt. We are very worried about a wave of business closures through 2022 as they face a tipping point of continued revenue loss and maximum indebtedness. The situation is untenable with the current one-size-fits-all approach to government support programs,” said Perrin Beatty, President and CEO, Canadian Chamber of Commerce.

(OTTAWA) – June 10, 2021 – We all know sectors like travel and hospitality will take longer to return to pre-pandemic revenue levels, but their growing debt load might set the stage for a broad swathe of businesses permanently closing their doors after Canada is fully vaccinated.

“Businesses in customer facing sectors that have made it to today, so close to reopening and herd immunity, face two grim realities: lower revenues for up to two years and an inability to take on more debt. We are very worried about a wave of business closures through 2022 as they face a tipping point of continued revenue loss and maximum indebtedness. The situation is untenable with the current one-size-fits-all approach to government support programs,” said Perrin Beatty, President and CEO, Canadian Chamber of Commerce.

These travel, hospitality, and tourism industry sectors will remain unable to reach their full activity for many quarters. Several factors are converging to limit their recovery, including the likely uneven rollback of travel restrictions; public health regulations that limit capacity in venues; and the need to build customer confidence after a long campaign by governments to encourage Canadians to stay home and avoid large gatherings. The runway to recovery is much longer for businesses in these sectors that for others that no longer need government support.

In the March 2021 the Canadian Survey on Business Conditions, half of businesses in the hardest hit sectors reported they are unable to take on any more debt, compared to 34% of businesses from across all sectors. The most recent Canadian Survey on Business Conditions found that employers in the accommodation and food services sector were three times as likely to lay off staff over the next year due to depressed consumer demand.

“It would be tragic to have businesses manage to survive up until now, only to have to close their doors just before they reach the goal line. It would also be a waste of the government supports they’ve received. Focusing on these few sectors that need continuing help is not only the right thing to do, but also smart policy to help millions of Canadians return to their jobs,” added Beatty.

The Canadian Chamber of Commerce provided a 12-point plan to help policymakers tailor their supports for these sectors, including:

  • The Canadian Emergency Wage Subsidy (CEWS) and Canada Emergency Rent Subsidy (CERS) should be maintained at their current respective 75% and 65% maximum rates through to Fall 2021. CERS also needs to be expanded to work better for medium-sized businesses and for those with locations in high-cost-of-living areas.
  • From September 2021 onwards, the CEWS and CERS programs should be retooled so they continue for the hardest hit sectors through to Spring 2022, while winding down for businesses in sectors that have recovered.
  • Interest payments on all government-backed loans for businesses in the hardest hit sectors under the CEBA and HASCAP programs should be forgiven.
  • Introduce a point of sale HST rebate for hospitality and entertainment activities for 2021-2023.
  • Federal and provincial governments should make available free rapid test kits to consumer-facing businesses until they are no longer needed to protect public health.
  • The federal government should lead in developing a national standard for provinces to implement health credentials that include vaccination status and test results, including what businesses can ask of their customers about vaccination status.
  • The federal government should enhance the COVID-19 Alert App by ensuring all positive cases are loaded into the COVID Alert App by provincial and territorial governments, and private clinics.

For more information on the Canadian Chamber’s 12-point plan, click here.

The recommendations were developed with advice from the Canadian Chamber’s COVID-19 Recovery Leadership Council, a group of CEOs and senior executives from leading companies contributing their entrepreneurial skills and experience in delivering projects at scale. The goal of the council is to advise on practical solutions to reduce and ultimately eliminate COVID-19 in Canada and pave the way for a business-led economic recovery. For more on the Canadian Chamber’s COVID-19 Recovery Leadership Council, click here.

About the Canadian Chamber of Commerce – Because Business Matters

The Canadian Chamber of Commerce helps build the businesses that support our families, our communities and our country. We do this by influencing government policy, by providing essential business services and by connecting businesses to information they can use, to opportunities for growth and to a network of local chambers, businesses, decision-makers and peers from across the country, in every sector of the economy and at all levels of government, as well as internationally. We are unapologetic in our support for business and the vital role it plays in building and sustaining our great nation.

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For more information, please contact:
Phil Taylor
ptaylor@chamber.ca (preferred and fastest response time)

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