Q4 survey shows fragile optimism as firms face soft demand and restrained investment plans
Canadian companies ended 2025 feeling somewhat less pessimistic than earlier in the year, but business confidence remains subdued and decision-makers continue to brace for weak demand and external uncertainty.
That’s the message from the Bank of Canada’s Business Outlook Survey for the fourth quarter of 2025, conducted through interviews with senior executives in November, which indicates that sentiment has improved from mid-year lows, but remains below historical norms. Firms are not anticipating an imminent downturn, but neither are they preparing for a strong rebound.
Sales performance over the past year has been underwhelming with around one third of surveyed businesses reported declining sales volumes, underscoring the strain that slowing demand and lingering trade disruptions have placed on revenue growth. Looking ahead, companies expect only modest improvement in both domestic and export sales, with export growth projections remaining especially restrained.
Uncertainty tied to the external environment continues to weigh on outlooks. The report notes that “businesses continue to cite uncertainty surrounding financial, economic and political conditions, slowing demand, and cost pressures as their most pressing concerns,” reinforcing that hesitation remains widespread.
Hiring and investment plans reflect this cautious stance. Most firms believe they have enough capacity to meet expected demand and do not anticipate meaningful workforce expansion. Some are even considering staff reductions. Capital spending intentions have ticked slightly higher, but planned outlays are largely aimed at maintenance and replacement rather than growth initiatives.
Cost pressures linked to tariffs have eased compared with earlier in the year, but they have not disappeared. As a result, most businesses do not foresee significant selling-price increases in the near term. Inflation expectations among firms remain steady, generally ranging between 2.5-3%.
The balance of opinion on future sales has turned positive, but it still sits below long-term averages. In practical terms, firms are preparing for stabilization rather than acceleration.
Meanwhile, as Parliament prepares to resume, the Canadian Federation of Independent Business is calling on the federal government to make 2026 a year of the entrepreneur and implement policies that will support the growth and success of small businesses.
“2025 was a rollercoaster for small businesses. They had to navigate unpredictable tariffs, continued labour disputes and disruptions, and weak consumer demand, all while the cost of doing business continued to rise,” said Corinne Pohlmann, CFIB’s executive vice-president of advocacy. “The November federal budget did not provide meaningful support to small businesses. We urge Parliament to make small business priorities their priorities this winter and to strengthen Canada’s entrepreneurial landscape.”
CFIB is calling on the federal government to:
• Lower the small business tax rate from 9% to 6%, increase the small business deduction threshold from $500,000 to $700,000 and index it to inflation.
• Ensure that the money collected through Canadian counter tariffs is returned to all affected Canadian small businesses.
• Introduce a lower EI premium rate for smaller employers or move the employer/employee split from 60/40 to 50/50.
• Include food in Canada’s mutual recognition framework.
• Measure and report on the total number of rules in place and introduce a “two-for-one” rule that applies to all regulations, legislation, and policies.
• Ensure that there are no work stoppages or disruptions in the federally regulated transportation sector and at Canada Post.
• Ensure that immigration programs align with local small business labour needs.
• Implement a clear path to balancing the overall government budget with legislated spending limits outside of a global crisis.
