What economic upheaval could mean for small businesses
Recent Chartered Professional Accountants of Canada (CPA Canada) Business Monitor (Q1 2023) study revealed that more than two-thirds of senior level CPAs predict that there will be a recession in Canada this year. In addition, fewer respondents—only 18%—are upbeat about the Canadian economy than they were in Q1 2022, when 40% were.
According to poll findings, participants are less likely to be positive about their companies this quarter than they were a year ago. This year, respondents' expectations for their own companies fell across the board, with 61% expecting higher revenue, 51% expecting higher profits, and 38% expecting more employees, down from 56%.
“CPAs in business have a very realistic economic outlook, with the consensus anticipating a mild recession coming this year. However, very few envision declaring bankruptcy or shutting down,” David-Alexandre Brassard, CPA Canada’s chief economist, said. “The Canadian economy has been surprisingly resilient in early 2023, but there are many signs that it will weaken before it gets better.”
The two biggest problems the economy continues to face are inflation (19%) and interest rates (18%). Around two-thirds of company executives claim that inflation is still having a bearing on their companies, and the majority believe that this impact will last at least a half-year.
“CPA business leaders expect inflation to remain high with price pressures now coming from the labour side,” said Brassard. "Companies are continuing to adjust wages for higher costs of living, which is sustaining inflation. This means that the high interest rate environment may remain for longer than anticipated.”
Thirty-eight percent of respondents believe inflation will have an effect on their companies for a year or more, 28% for less than a year, and 3% are unsure about the time frame. Thirty-one percent either claim that it has no effect or are unclear.
The cost of living is a big factor in how employers are rewarding their staff, with 37% reporting that they have increased pay by 5% or more or plan to do so. Forty-three percent of respondents said their salary would or has been increased by 3% and 5% with 12% doing so at a lower level. Eight percent of the respondents are unsure or don't plan to make any salary adjustments.
"Canadian business leaders expressed decreased optimism in their business outlook, with hiring plans being negatively impacted," Brassard had said in December 2022. "Our results show only 37% believe they will have more employees one year from now, compared to 52% last year."
