Canadian companies say they need immediate and direct help from the federal government’s economic stimulus package if they are to survive the severe downturn caused by the COVID-19 pandemic.
With each day, more companies are shuttering their doors – either because of government directives or their own precautions – to reduce the spread of the virus. The resulting situation is virtually without precedent as some companies see their revenues halt in an instant, and for an unknown period.
The Canadian economy is set to shrink dramatically, and many forecasters expect a second-quarter contraction that approaches or exceeds the worst results from the financial crisis of 2008-09, making the road to recovery even steeper.
Ottawa is expected to unveil Wednesday a nearly $30-billion economic stimulus package that provides support to affected workers who wouldn’t normally qualify for employment insurance, along with additional help for businesses facing cash-flow problems, sources told The Globe and Mail. The sources are being kept confidential because they were not allowed to speak publicly about the stimulus measures.
Industry groups said direct aid delivered quickly is critical because many companies are in a cash crunch and getting closer to insolvency.
“Most of our members are small and medium-sized businesses – they don’t have more than a couple of weeks of liquidity,” said Dennis Darby, president and chief executive of Canadian Manufacturers & Exporters (CME), one of the country’s largest industry groups. “We’re hearing from them, they’re all worried about their creditors trying to close them down if they can’t make their payments.”
Amanda Munday, owner of the Workaround, a co-working and child-care business in Toronto, said the issue is “two-weeks urgent."
"We need a solution before April 1 – rent and mortgage payments are due,” she said.
The message from the travel and tourism industry was just as dire.
Sunwing Airlines Inc. said it was stopping operations after March 23, according to the union that represents its 470 pilots, Unifor. The pilots have been told they are laid off, said Jerry Dias, head of Unifor. It would be the first Canadian airline to shut down amid the COVID-19 pandemic.
“An alarming number of small businesses in [the tourism] sector are facing imminent closure unless they can access credit in the next few days to stay afloat,” said Charlotte Bell, president and CEO of the Tourism Industry Association of Canada (TIAC), in a letter to Finance Minister Bill Morneau that was shared with The Globe.
“To be clear, bold measures are needed now, within days – not weeks or months, to ensure the survival of this industry,” she added.
Tuesday brought a fresh round of announcements from businesses that are reducing operations or shutting down, including the clothing chain Moore’s, luxury retailer Holt Renfew, British Columbia’s White Spot burger chain, Reitmans Canada Ltd., shoe chain Aldo and H&M, among others. Canada’s oldest retailer, Hudson’s Bay Co., said it would shut all stores across Canada, and would reassess whether to open again in two weeks.
To date, Canadian policy makers have announced a variety of measures aimed at mitigating COVID-19’s economic impact. The Bank of Canada has slashed interest rates and unveiled tools to support the financial system, Canada’s banking regulator has eased the industry’s “stability buffer” to boost lending capacity, and $10-billion in credit was set aside for small and medium-sized businesses facing a cash crunch.
The CME is calling for temporary cuts to payroll taxes and other government fees; direct grants to manufacturers in financial distress; and elimination of red tape to apply for and use government support programs.
TIAC’s letter included a slew of suggestions, including “fast-tracked liquidity options” for struggling businesses and various tax holidays for airlines.
Mr. Darby of CME welcomed Mr. Morneau’s announcement on Friday of a $10-billion Business Credit Availability Program for private business through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC), but noted that “we haven’t heard any details on how businesses can access [the funds] ... we’re waiting to hear.”
Mr. Darby said officials have told him details will be posted online Wednesday.
Some particularly vulnerable sectors – such as accommodation and food, and passenger transport – could see their economic output plummet by 50 per cent in April from February, research company Capital Economics said on Tuesday.
Small businesses are already laying off workers, according to a survey released Tuesday by the Canadian Federation of Independent Business.
The CFIB says half of its members responding to a survey have had sales drop because of the novel coronavirus, and 42 per cent of respondents said sales will fall to zero if face-to-face contact with customers is not possible.
For those businesses experiencing a sales drop, the average loss is $66,000. Forty-three cent of survey respondents have cut hours for staff and 20 per cent have laid off workers.
CFIB president and chief executive officer Dan Kelly said the government’s initial focus on health concerns is understandable, but that pressures on employers are growing daily.
“I’m underwhelmed by the economic response to this,” he said, adding that he believes the government should follow the lead of Scandinavian countries and introduce a wage subsidy program that allows companies to avoid layoffs. (The online survey had 8,730 respondents but is not a random poll and does not have a statistical measure of error.)
The restaurant industry is getting crushed as potential customers practise social distancing, and as governments limit their operations. On Monday, the number of seated diners in Canada plunged by 60 per cent from a year ago, based on online, phone and walk-in bookings tracked by OpenTable.
Walt Judas, chief executive officer of the Tourism Industry Association of BC, said significant layoffs are already taking place in his province, and some hotels have seen their occupancy rates ebb to as low as 4 per cent. As cancellations build up, he said, some travel operators are down to their final month of cash.
“The bloodletting is growing by the day,” Mr. Judas said.
For Ms. Munday, the Workaround owner, revenue has been wiped out by a provincewide daycare shutdown. She has laid off nine staff, including herself, and now faces rent and loan payments, with no money coming in to pay either.
“I can tell you with complete certainty, we will not make April rent. I could not pay payroll even if I had anyone on,” said Ms. Munday, who is also on the board of the Danforth Mosaic Business Improvement Area, representing more than 400 businesses in the city’s East Danforth area. “I’m not sure we’ll make our BDC loans ... I don’t know about hydro and I don’t know about insurance.”
“When I say I’m on the brink of personal bankruptcy, I mean now. Right now.”
With a report from Robert Fife