Four in 10 Canadian businesses say profitability won’t return to pre-COVID levels until 2023

As the world grapples with the lingering effects of the COVID-19 pandemic, Canadian businesses face a slow and uncertain recovery path. According to the latest “Voice of Business” survey conducted by HSBC.

Which involved more than 7,300 business leaders across 14 countries, including 536 from Canada. The economic repercussions are far from over.

Nearly 40% of Canadian companies do not foresee a return to pre-pandemic profitability until after 2022, underlining the severe impact of ongoing economic challenges such as inflation and new COVID-19 variants.

Survey Findings on Profitability and Recovery

The HSBC survey paints a detailed picture of the recovery timeline anticipated by businesses worldwide. In Canada, only a quarter of businesses expect to return to their pre-pandemic profitability by the end of the current year, and an additional 36% are aiming for recovery by the end of 2022. However, 39% of businesses are bracing for a more prolonged recovery period beyond the next year.

This extended recovery timeline can be attributed to multiple factors, including the fear of new COVID-19 waves, which remains a dominant concern among Canadian business leaders. Inflation, too, has emerged as a critical challenge, squeezing margins and heightening uncertainty about future costs and pricing.

Comparative Analysis of Business Sentiment

The sentiment among Canadian business leaders starkly contrasts with their global and especially American counterparts. While 56% of Canadian businesses report feeling more optimistic than a year ago, this figure falls short of the 72% optimism rate reported by businesses in the United States and 64% globally. This discrepancy highlights a unique cautiousness in the Canadian business community, perhaps influenced by localized issues and the direct impacts of global disruptions on the Canadian economy.

Key Concerns for Canadian Businesses

Diving deeper into the survey, the primary concerns for Canadian businesses are clearly outlined. The threat of COVID-19 continues to loom large, cited as the top concern by most respondents. Following closely is the issue of inflation, which compounds the challenges businesses face trying to forecast expenses and growth in an unstable economic environment.

Beyond these, Canadian businesses are also significantly troubled by supply chain disruptions and labor market uncertainties. The recent floods in British Columbia, for instance, have caused immediate logistical nightmares and are expected to have long-term effects on supply chains and the cost of goods, further complicating the recovery process.

Impact of External Factors

The survey also sheds light on the broader impacts of global supply chain bottlenecks exacerbated by recent weather disruptions in B.C., leading to shipping delays and increased company costs. Only 29% of Canadian companies have increased the number of international suppliers they work with a rate lower than the global average of 36%. Moreover, just 12% of Canadian firms expect international trade to become easier over the next year, compared to 20% of global companies, indicating a more cautious or realistic outlook among Canadian traders.

Opportunities and Future Outlook

Despite the prevailing gloom, there are silver linings and opportunities for Canadian businesses. Alan Turner, HSBC Canada’s head of commercial banking, points out the disconnect between the pessimism in Canada and the optimism observed in the U.S., suggesting that Canadian businesses might be overlooking potential opportunities.

“It doesn’t seem to correlate that we should be so pessimistic in Canada when our biggest customers in the U.S. are optimistic,” Turner commented. He further argued that withdrawing from a globally bullish community because of local bearish sentiments could be a grave mistake for Canadian businesses.

Turner advocates for Canadian firms to engage more deeply with international markets, leveraging the optimism and economic recovery trajectories of their international counterparts, particularly in the U.S., to fuel their own growth and recovery.

The road to recovery for Canadian businesses is fraught with old and new challenges, as highlighted by the HSBC “Voice of Business” survey. The path forward requires a balanced approach, acknowledging the real and pressing concerns like inflation and supply chain disruptions while seizing the opportunities arising from a recovering global economy.

For Canadian businesses, adapting to this dual reality of managing risks while aggressively pursuing emerging opportunities might be the key to navigating the post-pandemic world. As businesses around the globe inch towards normalization, Canadian companies must also find their footing, balancing caution with calculated optimism.