Hard-hit Canadian businesses call for extensions as COVID-19 aid programs wind down

Click to play video: 'What happens when rent & wage subsidies expire in July?'
What happens when rent & wage subsidies expire in July?
Personal finance expert, Rubina Ahmed-Haq, talks about the impact of the looming expiry of government rent and wage subsidies, plus why your pandemic pet may be costing more than you first thought. – May 27, 2021

Richard Vanderlubbe, owner of Canadian travel agency, has had to cut active staff to about 15 per cent 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

“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 five per cent of the economy in 2020. Still, they employed about 1.5 million of Canada’s 18 million-strong workforce.

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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 per cent 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 per cent of eligible expenses this month and are scheduled to decline to 20 per cent by September. And the business loan program stopped accepting new applications on June 30.

Click to play video: 'Hard-hit businesses call for extended wage, rent subsidy programs'
Hard-hit businesses call for extended wage, rent subsidy programs

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

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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 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 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 labor 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)

(Reporting By Nichola Saminather; Additional reporting by Julie Gordon and David Ljunggren; Editing by Denny Thomas and Marguerita Choy)

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