For many small businesses, the COVID-19 pandemic has become an existential crisis, with revenues dropping substantially amid lower demand and necessary measures to flatten the epidemiological curve.
Tourism has collapsed as COVID-19 cut travel demand and, more recently, the federal government has restricted entry into Canada to just Canadian citizens and permanent residents, and permitted essential travel only. Physical distancing policies have contributed to lower spending as consumers stay home, and are causing some retail businesses to temporarily close through the pandemic. Restaurants have shifted to take-out and delivery only or closed their doors. Manufacturing is grappling with broad slowdown across North America amid measures to control the pandemic, with reverberations felt throughout the supply chain.
While data remains scarce, the latest business confidence survey from the Canadian Federation of Independent Business shows how deep the pandemic is cutting. The monthly Business Barometer index fell to a record low nationally from 60 points in February to 30 points during the second half of March, which is below levels observed during the financial crisis of 2008-09. A value above 50 denotes positive expectations for the year ahead. B.C.’s index fell from 56.2 points in February, an already soft level, to 28.8 points in March.
Like provinces across Canada, the rapid deterioration in the business environment is readily seen in B.C., particularly given high exposure to tourism. On the state of business health, only 12% noted it was bad in February, with 42% assessing the state as good. This flipped in March, with 41% assessing as bad and 18% as good. On the employment front, 51% of survey respondents look to cut full-time staff over the next three months, and only 4% are looking to add positions. This is consistent with media reports of widespread layoffs across both large and small organizations.
That said, the federal government has announced announced game-changing support for businesses, with promised wage subsidizations of up to 75% for affected businesses backdated to March 15. This is up from a prior announcement of 10%. Additionally, the federal government also guaranteed business loans of up to $40,000, interest free for one year.
The most recent tourism data is from a more normal time. Total international tourist visits to B.C. remained elevated in January despite declining close to 5% from December and same-month 2019, to a seasonally adjusted 507,861 entries. Fluctuations in the data partly owe to timing of the lunar new year which is associated with tourist flows from Asia, but with dates that change annually between January and February.
Tourism has since plummeted as COVID-19 has taken hold. Related service sectors have seen activity fall to essentially zero. Tourism-related weakness will continue even after the pandemic eases and the economy returns to a sense of normalcy as consumers will remain hesitant to travel amid health concerns and a reduced capacity in the airline sector.
Bryan Yu is deputy chief economist at Central 1 Credit Union.