Pandemic-hit Canadian businesses call for eleventh hour aid extension

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TORONTO (Reuters) – Richard Vanderlubbe, owner of Canadian travel agency Tripcentral.ca, has had to cut active staff to about 15% of the total workforce and close all physical locations since the coronavirus pandemic’s start, despite receiving the wage subsidy and business loan.

As the Canadian economy gradually reopens, the government is winding down these programs. But Vanderlubbe and other businesses hardest hit by the pandemic are calling for the extension of support until all restrictions are lifted, warning that failure to do so could choke many of them at the eleventh hour.

“The subsidies have been a lifeline,” Vanderlubbe said, particularly as travel agencies’ revenues have evaporated even as staff have had to keep working. “The company has to go more into debt or I have to put personal assets into the business… or lose it,” he added.

While the worst-hit businesses from the pandemic are mostly related to tourism, events and recreation, they made up less than 5% of the economy in 2020. Still, they employed about 1.5 million of Canada’s 18 million-strong workforce.

Their struggles contrast sharply with much of the rest of the economy, which is bouncing back strongly, with employment within 1.8% of pre-pandemic levels and further recovery forecast.

“It’s one thing to look at things in macro and say it’s not a big impact, but these are significant to the individual business owners,” Conference Board of Canada’s Director of Economic Forecasting, Ted Mallett, said.

Nearly 60% of the most affected businesses will not survive if the subsidies are not extended through 2021, surveys by the Coalition of Hardest Hit Business (CHHB) showed.

“The timing they’ve proposed makes sense for 95% of the economy,” said Hotel Association of Canada (HAC) Chief Executive Susie Grynol.

But “it does not make sense to invest in the (hardest-hit) businesses… then drop them right before the finish line, which could result in a collapse of the industry,” she added.

Already, the pandemic-driven emergency wage and rent subsidies have fallen to 60% of eligible expenses this month and are scheduled to decline to 20% by September. And the business loan program stopped accepting new applications on June 30.

Finance Minister Chrystia Freeland this week reiterated that the government is prepared to extend the support until the end of November if needed.

Business lobby groups are petitioning for the programs to remain for the most affected businesses.

“Politicians are anxious, understandably, to turn the page on this, because these programs are super expensive, and move forward to other agenda items,” said CFIB CEO Dan Kelly. “So the momentum… to fix some of the programs seems to have slowed.”

So far, the government has approved C$86 billion ($68.4 billion) for wage subsidies and C$48.4 billion of business loans, official data show.

Additional aid of a few billion dollars, introduced more recently for the hardest-hit industries and small businesses, is not sufficient, the business groups said.

“The number of bankruptcies has started to rise,” said Lori Sterling, senior counsel at law firm Bennett Jones and former federal deputy labour minister.

“It’s not huge at this stage but small businesses are predicting there will be a tsunami of bankruptcies,”

($1 = 1.2573 Canadian dollars)