Canada used to be a country that punched above its weight in business creation and entrepreneurship, but in recent years, this quality has declined. Even more worrying, more jobs are being created in the public sector and by non-profits/NGOs, thereby crowding out private-sector development.
A recent post on X highlighted the cratering of entrepreneurship in Canada. This is important because innovation and entrepreneurship drive new jobs and wealth creation. Having a robust, innovation-driven economy is the goal of every developed democratic/ market economy. In Canada, the number of active businesses under 2 years old has tanked by approximatley 40% year over year, and “entrepreneurship is collapsing.”
Entrepreneurship in Canada is collapsing.
Number of active newer businesses, under 2 years old, has decreased by 40% year over year.
This should be ringing alarm bells! pic.twitter.com/8a5GcMS0kW
— Kirk Lubimov (@KirkLubimov) June 12, 2026
The data references a release distributed by Equifax Canada (NYSE: EFX) that states:
“Canada data shows in the first quarter of 2026, Canadian entrepreneurship is on the decline and business payment challenges continued to build as more companies fell behind on payments to banks and lenders.”
The research indicates that fewer people are looking to start a business and that the volume of new businesses less than 24 months old has dropped considerably by 38.7%.
“This may indicate that escalating operating costs, persistent inflation, and current macroeconomic conditions may be having an impact on actively degrading the viability of business ownership and hurting new enterprise creation across Canada.”
A recent report published by MEI shares that in 2000, self-employment in Canada accounted for approximatleyh 16.1% of total employment. By 2025, this had dropped to 12.9%.
The report declares:
“But while Ottawa and the provinces debate resource extraction, entrepreneurship—the heartbeat of innovation, job creation, and economic growth—is in sharp decline. Indeed, as we shall see below, entrepreneurship has been declining for decades in Canada.”
Correspondingly, venture capital investment has dropped. In 2025, total investment declined by 6% and deal count by 12%. Canadian VC funds raised only $2.1 billion in 2025, the weakest year since 2016.
What is hammering entrepreneurship in Canada? The culprits are pretty obvious. High taxes are at or near the top of the list. In some provinces, the marginal income tax rate is over 53%.
More recently, a proposal to raise capital gains taxes, which was put on hold, sent another shudder through potential risk-taking entrepreneurs.
Excessive regulations are a hidden tax upon the populace. While many policymakers view regulations as a burden on employers and businesses, the toll is ultimately borne by end users, consumers, and other firms.
The Canadian Federation of Independent Business reports that total regulatory costs for small businesses are $51.5 billion in 2024, a 13.5% jump from 2020. The Federation believes that many of these rules are unnecessary or simply bureaucratic red tape.
On the other side of the equation, public sector employment and NGO/charity jobs are on the rise. The same MEI report warns that public-sector employment has grown while private-sector jobs have declined. Estimates peg government employment at around 21.8%, with a recent increase. Meanwhile, NGOs and Charities are estimated to account for around 14.5% of jobs. Eventually, the government and taxpayer-supported entities could dominate employment. Canada already has budget deficits due to the extensive public services it provides. So who will pay for it all? More public sector jobs add to the burden.
The sad thing is that decades ago, Canada had a robust innovation-driven sector. The country is also home to a solid higher education system and vast natural resources, as well as incredible natural beauty, which belies the economic challenges.
Today, innovation in Canada is struggling, and GDP has stagnated or declined. A recent economic report declared the Canadian economy to be in recession, the only G7 country to gain this status.
To fix all of this, hard policy decisions must be made, which will not make sectors of the electorate happy. It is more of a question of pain today, or greater pain tomorrow. This is unavoidable.
Most politicians will kick the can down the road so they can get reelected on promises they will never keep. These same politicians will, unfortunately, be supported by a duped population who won’t let the facts get in the way of their hollow predictions of a better future.
