The small enterprises that are crucial to the Canadian economy – representing 42 per cent of GDP and 48 per cent of new jobs – are also those at greatest danger in this unique recession, says a new report by RBC Economics.

The report, Small Business, Big Pivot, which was released on Thursday, said Canada’s rebuild depends on small business’s rebound.

“Tending to be ‘digital novices’ –a significant number are without a website, or the ability to facilitate online payments – small firms were ill-prepared for the rapid economic shift that has emerged in the pandemic’s wake, an abrupt lurch to a virtual marketplace that has caught many off guard,” said the report.

“This crisis may be the moment for these companies to reboot and reposition themselves for a new economy that will be more digital, more virtual and more mobile than anything we’ve seen. The ability of our nation of small businesses – the local barber shops, health food stores, software startups and greenhouse operations – to pivot to this new reality will be critical to Canada’s overall recovery.”

The report found:

  • Small firms have recorded almost double the rate of job losses as mid-sized and large firms;
  • Small firms in five sectors—accommodation and food services; arts and entertainment; non-essential retail; mining and oil & gas services; commercial real estate leasing—are most vulnerable; potentially affecting 1.2 million workers;
  • Small firms in sectors like technology, wholesale trade and administrative services face a relatively lower risk; their fixed-cost burden is lighter and they can deliver products and services with little to no physical contact;
  • Women and youth face the greater job risk from small-business woes; they’ve suffered outsized employment declines already;
  • GDP in some of the hardest-hit sectors is expected to remain around 25-50 per cent below February levels at the end of the year, even as the recovery takes hold; and
  • The pandemic is creating new economic trends and accelerating others, offering roadmap for an altered economy: more digital delivery; more domestic procurement; less market concentration; more consumer caution.

“Charting a course out of the pandemic won’t be as easy as flicking a digital switch, nor can it mean a reversion to practices that worked in the past,” said RBC.

“Fiscal support and a rebound in consumer spending will ensure an overall recovery. But its scale and speed will depend on how small firms reimagine themselves to confront the challenges and opportunities of the post-pandemic business landscape.:

Here’s how the country can help, according to the RBC report:

1. Streamline relief programs. As we shift to a recovery, the government has an opportunity to refresh and streamline its business relief programs. Most immediately, those options could include:

  • a topped up Canada Emergency Business Account (CEBA) and modified Business Credit Availability Program (BCAP) with greater forgiveness to cover a protracted recovery and help owners retrofit facilities for social distancing;
  • changing the Canada Emergency Response Benefit (CERB) to allow for a sliding scale to be paid to those going back on payroll;
  • offering a brief tax holiday for small businesses to spur the recovery of local shopping and tourism.

2. Invest in capacity for safe reopening. Provincial governments should consider investing in broad-based programs to help employers restart their businesses. These could include:

  • a nationally-coordinated program to certify public-facing facilities as COVID-safe;
  • provincially-led and funded coalitions of business groups and chambers to provide personal protective equipment to small companies;
  • an initiative to remotely connect students with small businesses to help them gain work skills and mentorship opportunities.

3. Build digital networks. Small firms will not only need tools for a post-pandemic economy, they’ll need to form alliances to compete in the global platform economy. A recovery plan needs to incorporate a digital strategy that could include:

  • tax credits for small firms to invest in Canadian designed software and hardware to enable digital growth;
  • a national program to create virtual farmers’ markets and virtual Main Streets;
  • an acceleration of the Budget 2019 commitment to provide high-speed Internet to every Canadian and business by 2030.

4. Set new economic strategies to help scale. Governments and large enterprises have an opportunity to invest in sectors that leverage Canadian supply chains and fuel small business growth including:

  • coordinated procurement efforts to designate preferred small business suppliers with a special focus on PPE, testing and tracking technologies and health care;
  • Canada 2020-21 tourism campaign to spur domestic travel;
  • a renewed provincial commitment to lower interprovincial trade barriers for small firms in 2021.

5.Create a more strategic approach to globalization. In a world that is likely to be more fragmented, Canada will need a more focused approach to trade. We may need:

  • a “Go Global” program using trade accelerators to boost exports to countries more open to Canadian goods;
  • a coalition of governments, banks and other institutions to form a “Brand Canada” platform for small firms;
  • expanded expat networks to connect knowledge-based industries with global Canadians.