Small businesses’ latest headache? Endless construction

One morning in May, Christine Fedirchuk, owner of a herbal health store, opened her door to find the road restricted to one lane and a six-foot-deep hole with a temporary metal fence around it had appeared out front.

Ms. Fedirchuk knew it would drive customers farther away, at a time when she was already losing money. Right after she opened Urban Renewals in Toronto in 2022, construction work to address basement flooding, enhance pedestrian safety and improve the streetscape began on O’Connor Drive on the city’s east side, with the completion date continually pushed back.

It’s a frustrating situation for a small-business owner and it’s becoming far more commonplace.

As Canada steps up needed investment in transportation engineering, road and sewage infrastructure – with spending rising by more than 50 per cent from 2019 to 2023 – it’s putting greater pressure on small businesses around the construction sites that are dealing with the loss of customers, road closings and disruptions to water and electricity services.

A survey of 1,240 respondents run by the Canadian Federation of Independent Business (CFIB), an organization representing Canadian owners of small and mid-size enterprises, shows 67 per cent of small businesses have been affected by disruptions from local construction projects over the past five years. The affected businesses lost 22 per cent of revenue on average and incurred more than $54,000 per business in additional expenses.

Simon Gaudreault, the chief economist and vice-president of research for CFIB, said his group is calling for municipal and provincial governments to mitigate construction-related problems. This could involve offering businesses compensation, giving advance notice of incoming projects and improving co-ordination between different stages of construction to make sure the projects are completed on time.

“The projects that beautify streets made them sometimes more tailored to commercial purposes. But before you get to a finalized project, the problem is you have to survive construction,” Mr. Gaudreault said. “And too often sadly we see that local businesses do not manage to survive the construction period.”

The impact of increased construction projects is compounded by other factors plaguing Canadian businesses: skyrocketing inflation, weaker consumer demand and rising interest rates. The Globe reported in May that business insolvencies in Canada are hitting their highest point since the Great Recession.

Ms. Fedirchuk said her sales have been seriously affected because people are taking detours and not coming to the store. The street was cut out and dug down two feet last year and the water main replacements this year left huge holes, and sometimes, piles of gravel along the sidewalks that deterred many seniors from dropping by, she said.

After seeing the completion time being pushed back three times over the years, Ms. Fedirchuk is not hopeful the construction will be finished as promised this September. She recently invested in e-commerce on her website, offering shipping options, and hired a person to manage the social-media account.

“We’re not breaking even. That’s why I’m desperate to pay almost [$900] extra just to ship because I’m hoping to turn this around. I need this to turn around,” she said, adding that her store, which only opened in the fall of 2019, had to close temporarily during the pandemic even as she continued to pay rent.

Business owners have had to use savings to weather the storm during construction, but their nest eggs have been depleted because of the pandemic, Mr. Gaudreault said. Some have had to take on additional debt to cover losses.

That’s what happened in James Smith’s store, Smith Army Surplus in Kingston. Mr. Smith has seen his sales go down three years in a row and is making $10,000 to $18,000 less per month compared to last year. Mr. Smith says local construction projects are a factor.

A century-old Bascule bridge that connects downtown Kingston to the city’s eastern suburbs was demolished a month ago after it was damaged on March 30 and closed. Approximately 23,000 vehicles had crossed the bridge daily. A temporary replacement bridge is planned for the fall.

Additionally, construction on high-rises downtown has taken away three major parking lots, Mr. Smith said, making it difficult for people who drive there to shop. And there are construction projects on Highway 401, which is one of the major alternative routes to get to the city when the bridge is closed.

“I understand that infrastructure has to be updated. I get that. To me though, it’s just about how you balance out. You don’t do everything at once. You kind of do one thing one year,” he said, adding he feels there’s a lack of communication between the city and the province in co-ordinating their projects.

Mr. Smith’s line of credit has gone up as he has grappled with declining sales, increased rent and costs of goods.

CFIB believes some kind of compensation plan or tax break could help businesses in trouble. Some cities are already doing so. Calgary’s city council approved a grant pilot program in March to provide one-time payments of $5,000 to help businesses adapt their location during city work. Montreal is also offering a $5,000 lump-sum grant in addition to the city’s older aid program, which offers up to $40,000 per eligible financial year.

However, the mayor of Guelph, Ont., and city councillors in Ottawa told CFIB there are legislative constraints in Ontario’s Municipal Act that prohibit direct funding to businesses and property tax breaks as “granting of bonuses,” according to Mr. Gaudreault. CFIB reached out to Ontario’s Housing Minister about the issue and is still waiting to hear back. The minister didn’t get back to The Globe’s media request before publication.

Linda Patterson, owner of the Dairy Queen in Fort St. John, B.C., says her sales in June were $12,000 lower than last year because of construction on the main street that has lasted for more than three years and diverted customers. She said it would be nice to get some compensation.

“If they could have helped us with having it shown on our taxes like maybe reduced our taxes … we paid $13,000 in taxes. And normally it used to run like close to $10,000, so it went up $3,000, and so instead of helping us, they actually raised their taxes,” Ms. Patterson said.

Last year was a warm year, she said, but the store lost around 30 per cent of revenue and barely made any money – and this year the sales are even down from 2023.

“It’s just barely breaking even right now,” Ms. Patterson said. “May, June, July and August are our busiest months, and we have to make most of our money in these four months so that we have some in the bank to make it through the winter.”