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

·2 min read

Nearly 40 per cent of Canadian businesses say they do not expect a return to pre-pandemic profitability levels by the end of next year, as concerns about rising inflation and new waves of COVID-19 weigh on business prospects.

That's according to HSBC's most recent Voice of Business survey of more than 7,300 business leaders in 14 countries, including 536 Canadian companies. The survey found that 25 per cent of businesses will reach pre-pandemic levels of profitability by the end of the year, and another 36 per cent expect to hit those levels by the end of 2022. But other companies expect a more prolonged recovery period, with 39 per cent reporting that they will return to pre-pandemic levels of profitability after 2022.

The survey also found that Canadian businesses are feeling more pessimistic about their future growth prospects than entrepreneurs in other countries. In Canada, 56 per cent of businesses say they feel more optimistic than they did a year ago – a time that was marked by COVID-19 uncertainty – compared to 72 per cent in the U.S. and 64 per cent globally.

"Many are still fearful that COVID has not run its course. That was actually the No. 1 concern that came out among Canadian respondents… Just behind it you have inflation. That's certainly weighing on the minds of Canadian businesses," HSBC Canada's head of commercial banking Alan Turner said in an interview.

"These factors together have created quite a sanguine view of what the future holds – and this survey was done before the floods in B.C. happened."

Canadian businesses are also concerned about supply chain issues and labour market uncertainty, Turner says.

Global supply chain bottlenecks, and more recent weather disruptions in B.C., have resulted in shipping delays and led to rising costs for companies. That may be contributing to a cooling outlook on trade, HSBC says. The survey found that 29 per cent of Canadian companies have increased the number of international suppliers they work with, compared to 36 per cent among global companies. Just 12 per cent expect international trade to become easier over the next year, compared to 20 per cent of the global companies surveyed.

Still, Turner says there is reason for Canadian companies to feel optimistic about the post-pandemic recovery, despite the ongoing pessimism.

"It doesn't seem to correlate that we should be so pessimistic in Canada when our biggest customers (in the U.S.) are optimistic," he said.

"It'd be a great mistake if we withdrew from a global community that's feeling bullish because we're feeling bearish. Clearly there is opportunity out there that others are wishing to pursue, and there is a role for Canadian businesses in that."

Alicja Siekierska is a senior reporter at Yahoo Finance Canada. Follow her on Twitter @alicjawithaj.

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