CEOs convinced recession coming, but small businesses less sure: KPMG

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Small and medium-sized business owners are not as convinced as the country’s CEOs that the Canadian economy is heading into a recession and are being less aggressive when it comes to taking pre-emptive measures, new research from KPMG LLP Canada suggests.

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The KPMG studies released Tuesday found 92 per cent of Canadian CEOs the firm surveyed agree that there will be a recession in the next 12 months, while only two-thirds of the SMBs surveyed expected an economic contraction.

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Majorities of both groups expect any such recession to be “mild and short.”

To prepare for a recession, the study said four in 10 Canadian CEOs have implemented a hiring freeze and nearly half are considering downsizing their employee bases in the next six months. These figures are higher than the three in 10 SMB leaders who say they’ve frozen all new hiring and only 41 per cent who are mulling downsizing.

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Stephanie Terrill, a partner in KPMG Canada’s management consulting business, said that because CEOs and business owners make decisions that shape the economy, it’s important for Canadians to be aware of what’s on their minds.

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“There’s a lot of talk about recession, so we wanted to make sure there was some context around that for our business community and the citizens of Canada,” Terrill said in an interview.

For SMBs, skills shortages and the difficult hiring climate may be making them reluctant to cut their workforces.

The research found over half or 56 per cent of SMBs said they lack people with the skills to manage their business, while two-thirds are having a difficult time hiring people with the skills needed to grow their business. It said 74 per cent of SMBs believe Canada needs to welcome more foreign talent to meet business labour force needs.

Those in a small or medium businesses tend to already run leaner and therefore don’t really need to be as pessimistic as some of the larger company CEOs, Terrill said. At the same time, she said that CEOs who are too aggressive might be playing with fire.

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“While it may be tempting for some leaders to ‘slash and burn’ to manage through a recession, they ultimately do so at their own peril,” she said. “They are counting on both their customers and talent to be waiting for them on the other side of a recession that may never happen.”

Terrill suggests companies and SMBs capitalize on automation to help create some capacity to counter burnout and eliminate duplication. She said organizations can use any economic pause to shift the focus from expanding their footprints to stabilizing them.

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KPMG Canada surveyed business owners or executives at 503 small- and medium-sized Canadian companies between Aug. 16 and Sept. 1 using an online platform. It said 32 per cent of these companies reported annual gross revenue of over $500 million, 26 per cent between $300-$499 million, 18 per cent between $200-299 million, 16 per cent between $100-$199 million and 8 per cent below $50 million.

The firm also surveyed 1,325 international CEOs in 11 countries, 75 of which were in Canada, between July 12 and Aug. 21. All respondents had an annual revenue of more than US$500 million.

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