2.4 Reversing Canada’s Decline in New Company Formation to Unlock Economic Resilience and Growth
The rate of new company formation is one of the clearest signals of entrepreneurial vitality and long-term economic resilience. Each new business represents not only potential jobs and innovation, but also the cultural willingness to take risks and build the next generation of firms. Sustaining high levels of firm creation is therefore a strategic imperative for Canada’s productivity, competitiveness, and prosperity. Yet the data reveal a troubling decline. According to the Business Development Bank of Canada (BDC), in 2022 only 1.3 out of every 1,000 Canadians launched a new business— less than half the rate observed at the turn of the century, when the figure stood at 3 per 1,000. Over the past two decades, this decline amounts to roughly 100,000 fewer entrepreneurs, even as Canada’s population has grown significantly. The contrast with the United States is stark. In 2000, U.S. business formation was about 5 per 1,000 people, only modestly ahead of Canada. By 2022, however, the U.S. rate had surged to more than 15 per 1,000, and in 2023 it exceeded 16 per 1,000—a record high. In effect, Americans are now creating new businesses at a rate over ten times higher than Canadians. This divergence in trajectory has profound implications. While the U.S. is experiencing a surge of entrepreneurial dynamism, Canada is moving in the opposite direction. A shrinking pipeline of new ventures means fewer firms growing into procurement-ready suppliers, fewer regional anchors generating local jobs, and fewer high-growth companies feeding into the innovation capital continuum. Left unaddressed, this structural weakness will compound Canada’s productivity challenges and erode its economic sovereignty.
Figure 2: New business formation per 1,000 people, Canada vs. United States (2000 and 2023). Despite significant growth in Canada’s later- stage venture capital market, the rate of new company formation has fallen by more than half over the past generation. In contrast, the U.S. has more than tripled its formation rate— now creating new firms at over ten times the Canadian rate.
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