Statistics Canada reported this week the economic impact of the COVID-19 recession resulted in more business closures than the financial crisis of 2008.According to Blacklock’s Reporter, the data confirmed the existence of 'zombie businesses,' which are companies whose owners did not file for bankruptcy but instead walked away from their companies.“The term ‘business exit’ refers to the permanent closure of a business and an exit from the marketplace,” said a StatsCan report A Profile of Corporate Exits and Insolvencies. “A business owner may abandon the business or walk away without a formal process. A business exit can happen voluntarily.”Analysts found 'exits' did not appear in bankruptcy court statistics.“Formal insolvencies are not the whole story,” said Corporate Exits. “Formal insolvency is but one path a business in distress may take.”Analysts estimated in 2020, approximately 14% of small businesses permanently closed, which was an increase from the 12% closure rate in the previous year.The data was calculated based on businesses that stopped issuing T4 slips for their employees.“This finding represents a larger increase than observed during the 2008 financial crisis when the exit rate increased by one percentage point,” wrote analysts.The number of business closures increased during the same period when bankruptcies decreased, partly because of pandemic-related court closures.“The COVID-19 pandemic had a substantial impact on business dynamics, leading to the temporary or permanent closure of many businesses,” wrote analysts. Canada went into the pandemic with 1,198,632 small businesses, according to a Department of Industry estimate. Federal agencies to date have not compiled comprehensive figures on the economic impact of COVID-19.“In my view, there are hundreds of thousands of zombie businesses, businesses that are essentially dead but haven’t finalized the closure process altogether,” Dan Kelly, CEO of the Canadian Federation of Independent Business, testified at 2020 hearings of the Senate National Finance committee. “We are seeing greater numbers of business failures that actually haven’t been reported. We’re only at the tip of the iceberg.”In a 2022 survey, the Bank of Canada estimated approximately half of the businesses forced to close due to pandemic lockdowns remained closed even five months later.A bank report Business Closures and Re-Openings in Real Time Using Google Places referred to this situation as "business hibernation."Researchers monitored 12,976 businesses in Vancouver, Toronto and Ottawa under lockdown orders during April and May 2021. These businesses included bars, restaurants, shops, nightclubs and motels.“Half of businesses recorded as temporarily closed in May had reopened by the end of September,” said Closures.“Forty percent were still hibernating,” wrote researchers. “Ten percent were closed for good.”
Statistics Canada reported this week the economic impact of the COVID-19 recession resulted in more business closures than the financial crisis of 2008.According to Blacklock’s Reporter, the data confirmed the existence of 'zombie businesses,' which are companies whose owners did not file for bankruptcy but instead walked away from their companies.“The term ‘business exit’ refers to the permanent closure of a business and an exit from the marketplace,” said a StatsCan report A Profile of Corporate Exits and Insolvencies. “A business owner may abandon the business or walk away without a formal process. A business exit can happen voluntarily.”Analysts found 'exits' did not appear in bankruptcy court statistics.“Formal insolvencies are not the whole story,” said Corporate Exits. “Formal insolvency is but one path a business in distress may take.”Analysts estimated in 2020, approximately 14% of small businesses permanently closed, which was an increase from the 12% closure rate in the previous year.The data was calculated based on businesses that stopped issuing T4 slips for their employees.“This finding represents a larger increase than observed during the 2008 financial crisis when the exit rate increased by one percentage point,” wrote analysts.The number of business closures increased during the same period when bankruptcies decreased, partly because of pandemic-related court closures.“The COVID-19 pandemic had a substantial impact on business dynamics, leading to the temporary or permanent closure of many businesses,” wrote analysts. Canada went into the pandemic with 1,198,632 small businesses, according to a Department of Industry estimate. Federal agencies to date have not compiled comprehensive figures on the economic impact of COVID-19.“In my view, there are hundreds of thousands of zombie businesses, businesses that are essentially dead but haven’t finalized the closure process altogether,” Dan Kelly, CEO of the Canadian Federation of Independent Business, testified at 2020 hearings of the Senate National Finance committee. “We are seeing greater numbers of business failures that actually haven’t been reported. We’re only at the tip of the iceberg.”In a 2022 survey, the Bank of Canada estimated approximately half of the businesses forced to close due to pandemic lockdowns remained closed even five months later.A bank report Business Closures and Re-Openings in Real Time Using Google Places referred to this situation as "business hibernation."Researchers monitored 12,976 businesses in Vancouver, Toronto and Ottawa under lockdown orders during April and May 2021. These businesses included bars, restaurants, shops, nightclubs and motels.“Half of businesses recorded as temporarily closed in May had reopened by the end of September,” said Closures.“Forty percent were still hibernating,” wrote researchers. “Ten percent were closed for good.”
