In the first quarter of 2025, Canadian rural and small town (RST) businesses are facing cost pressures, labour challenges and supply chain disruptions. Despite these obstacles, optimism about their future outlook has grown compared with the previous quarter. However, ongoing uncertainties continue to shape strategic decisions and operations.
Cost-related obstacles remain the primary concern for rural and small town businesses
Just over three in five RST businesses (61.5%) reported cost-related challenges being a key concern in the first quarter. Inflation (43.3%) persists as the most frequently reported issue, followed by the cost of insurance (31.6%) and the cost of inputs (30.8%). Among the businesses reporting input costs as an obstacle, the cost of labour (50.9%) and raw materials (48.2%) were identified as sources of financial strain.
In the first quarter, over two-fifths (41.3%) of RST businesses anticipate rising operating expenses over the short term, while over one-quarter (26.7%) expect a decline in profitability. Nearly one-quarter (22.2%) of RST businesses plan to raise prices of their goods or services, up 2.3 percentage points from the previous quarter. Nevertheless, over two-thirds (69.8%) of RST businesses expect their prices to remain unchanged, which may indicate caution in passing increasing costs to consumers.
Chart 1: Obstacles for rural and small town businesses over the next three months, fourth quarter of 2024 and first quarter of 2025
Description - Chart 1
Sources: Canadian Survey on Business Conditions (5318), fourth quarter of 2024 and first quarter of 2025.
Rural and small town businesses face increasing difficulties with supply chains
Nearly one-fifth (17.3%) of RST businesses are facing supply chain-related challenges in the first quarter. Among these businesses, 48.9% expect supply chain conditions to worsen over the short term, up 23.3 percentage points from the previous quarter. About one-quarter (24.8%) of RST businesses experiencing supply chain issues reported conditions worsening over the past three months. Of these businesses, 69.9% identified increased prices of inputs, products or supplies as the driving factor for worsened supply chains, while 54.1% highlighted increased delays in deliveries of inputs, products or supplies.
In the first quarter, for RST businesses sourcing inputs domestically or internationally over the past year, 12.2% experienced disruptions due to labour disputes impacting transportation or logistics providers, while 11.6% reported experiencing disruptions due to labour disputes impacting suppliers.
Chart 2: Expectations of change over the next three months for rural and small town businesses facing supply chain obstacles, fourth quarter of 2024 and first quarter of 2025
Sources: Canadian Survey on Business Conditions (5318), fourth quarter of 2024 and first quarter of 2025.
Labour-related challenges continue for rural and small town businesses
Just over two-fifths (40.5%) of RST businesses expect short-term labour-related challenges in the first quarter. This includes recruitment difficulties (29.8%), labour shortages (20.3%) and employee retention (17.0%). Additionally, nearly one-fifth (17.4%) of RST businesses reported housing availability and costs moderately or to a large extent impacting hiring efforts over the past 12 months. On-site work remains prevalent among RST businesses, with 66.4% expecting employees to work exclusively on-site.
In the first quarter, nearly half (45.5%) of RST businesses plan to raise wages and 33.5% intend to invest in staff development training through classroom, workshops or online programs over the next 12 months.
Chart 3: Plans of businesses in rural and small town areas to invest in advanced technologies over the next 12 months compared with businesses in functional urban areas, first quarter of 2025
Sources: Canadian Survey on Business Conditions (5318), first quarter of 2025.
Limited advanced technology investments among rural and small town businesses
Technology investments remain limited for RST businesses in the first quarter, as nearly two-thirds (65.4%) do not plan to invest in advanced technologies over the next year. Of these businesses, 80.9% consider such investments irrelevant to their operations, while 11.0% cite financial constraints as a barrier.
In the first quarter, about half (45.7%) of rural and small town businesses reported not outsourcing tasks, projects or short contracts over the past 12 months. For RST businesses that do outsource, the top outsourced services include accounting, law or other professional services (39.7%), general labour, repairs or cleaning services (20.9%) and website or software development or computer programming (13.9%). Among these RST businesses that outsourced at least one task, project or short contract, most (92.8%) did not use third-party digital platforms for outsourcing.
Nearly one-third of rural and small town businesses experienced revenue growth in 2024 compared with 2023
Nearly one-third (30.9%) of RST businesses saw revenue growth in 2024 compared with 2023, with an average increase of 20.9%. A similar proportion (30.5%) of RST businesses experienced a decline in revenue in 2024, with an average decrease of 25.2%.
Note to readers
This analysis is detailed in an article released today in the Rural and Small Town Canada Analysis Bulletin, which highlights the economic conditions faced by rural and small town and urban businesses, along with their future plans and expectations. The findings are based on the Canadian Survey on Business Conditions, first quarter of 2025.
This survey was conducted by Statistics Canada from January 2 to February 6, 2025, to develop an understanding of the current practices of businesses and their expectations moving forward. When respondents were asked questions about their expectations over the next three months (referred to in the text as "short term"), that three-month period could range from January 2 to May 6, 2025, depending on when the business responded. For questions about expectations over the next 12 months, that period could range from January 2, 2025, to February 6, 2026.
Businesses were classified based on their geographic location. Businesses within census metropolitan areas or census agglomerations were classified as part of functional urban areas. All businesses in other locations were categorized as part of rural and small town areas.
Reference
Definitions, data sources and methods: survey number 5318.
Previous release: Outlook of rural businesses, fourth quarter 2024.
Contact information
For more information, or to enquire about the concepts, methods or data quality of this release, contact us (toll-free 1-800-263-1136; 514-283-8300; infostats@statcan.gc.ca) or Media Relations (statcan.mediahotline-ligneinfomedias.statcan@statcan.gc.ca).