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23Nov

COALITION OF HARDEST HIT BUSINESSES: LETTER TO FINANCE MINISTER FREELAND

OTTAWA (November 23, 2020) –

Dear Minister Freeland:

Thank you for your continued efforts to support Canadians during this global pandemic. These are challenging times, and we know that keeping Canadians safe and healthy is a top priority.

Many sectors were impacted by COVID-19, but few as severely as ours. Businesses in the tourism, travel, hospitality, arts, festivals and events sectors are in a crisis for one simple reason: the core of our business is about bringing people together, face to face, and this activity has been restricted by public health measures since mid-March. The result saw thousands of festivals, concerts, conventions, Indigenous tourism experiences, fairs, exhibitions, and business and sporting events cancelled, leaving our businesses without revenue for the past 6 months.

We are doing our part to prevent the spread of this virus. But our revenue and employment losses are staggering and unlike just about every other sector of the economy, our recovery is not forecast until the summer of 2021.

The government’s current COVID-19 measures that broadly support businesses and employment are adequate for most, but they are insufficient to ensure the survival of those in the hardest-hit category. We applaud the Government for its commitments in the Speech from the Throne which pledged support for the hardest-hit businesses. Urgent action is required to prevent deep and irreversible structural damage.

Our industries are aligned behind the need for support in three key areas:

  1. Increased wage subsidy support;
  2. Relief from fixed costs; and,
  3. Access to liquidity.

1. Wages

The Canada Emergency Wage Subsidy (CEWS) top up for the hardest hit businesses in July/August delivered a total subsidy rate of 85%. Since then, the economic position of businesses in the tourism and hospitality sectors has deteriorated, yet the subsidy rate has declined. We are grateful that the Government held the rate at 65% instead of dropping it down to 45% this fall. However, given that many businesses in our sectors are seasonal in nature, restoring the maximum 85% rate for the hardest hit would allow us the flexibility we need to bring back more workers, maintain them until the Summer, and position us for recovery. Without this support, we will continue to see mass terminations of the very employees we will need again in a few months’ time.

Our employees are predominantly women, new Canadians, immigrants, and visible minorities. These Canadians are at risk of socio-economic devastation and will be supported by Government one way or the other. It would be far better to allow them to maintain employment, and in many cases, continue to receive employee benefits and health coverage.

2. Fixed Costs

We appreciate the recent changes to the Canada Emergency Rent Subsidy, including the inclusion of property owners for the first time. This program will provide meaningful support to our smaller businesses, but some critical gaps remain.

The legislation includes a top-up “lockdown support” of 25% for businesses subject to a temporary regional shut down order by public health authorities. However, hard-hit businesses like ours have been sitting empty since March because of ongoing restrictions like the ban on mass gatherings. This ban has almost the same net effect as a complete shut-down, yet we do not qualify for the top up.

Second, the per property cap of $75,000 diminishes the value of the relief for many mid-size businesses. Similarly, the overall cap of $300,000 limits a multi-facility owner (for example, an owner with four hotels or more) from gaining full access to support. This cap is penalizing the many Canadian-owned, mid-sized, family run success stories that have expanded their operations and have become successful in regions across the country. They should not be punished or restricted from accessing a program because of modest growth.

Finally, there is a fundamental inequity in the legislation that favours renters over property owners. Property owners have a higher fixed cost amount (approximately 25% of normal revenue) but only 10% of these costs are eligible. Comparably, most of a renter’s fixed costs are eligible, including utilities which are not covered for property owners.

A modified fixed cost relief program, with proportional support directed to the hardest hit sectors and without caps is urgently needed.

3. Liquidity

The Business Credit Availability Program has not and will not work for hard-hit businesses. Banks are simply unwilling to lend to sectors facing high risk even if they are responsible for only 20 per cent of credit losses. These liquidity challenges need to be addressed without delay.

Even with the wage subsidy and some fixed cost support, hard-hit businesses will still face a liquidity crisis. Hard hit businesses are willing to take on added debt, but it is simply not available without a full government guarantee.

We need readily-accessible debt on reasonable terms and without personal guarantees. The CEBA program has been a great success story but it only meets the needs of the smallest businesses.

Minister, Canadians want to and will travel again. But without targeted relief measures, many hard-hit businesses like ours will fail, resulting in long-term unemployment and lost capacity to support tourism, conventions, and events in the years to come.

We hope the Government will fulfill its commitments in the Speech f rom the Throne by further tailoring these broad-based support programs to meet the needs of the hardest-hit sectors.

Sincerely,

COALITION OF HARDEST HIT BUSINESSES

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