Input and transportation costs, labour issues among headwinds for rural businesses

So far in 2025, Canada’s businesses have been facing an uncertain economic environment, in addition to the usual challenges and obstacles related to inflation, costs, and labour. For a considerable proportion of those businesses, the type of region where they are located is  also a factor to take into consideration.

There were more than 163,500 rural businesses across Canada counted in the second quarter of 2025. Let’s take a look at the latest data from the Canadian Survey of Business Conditions to get a sense of the differences between rural and urban businesses, based on what they’ve told us.

Rural businesses more likely to report input and transportation costs as well as labour shortages as obstacles

Inflation continues to be a top concern for businesses. In the second quarter of 2025, inflation is the most commonly expected obstacle over the next three months by half of urban businesses (49.8%), a proportion similar to rural businesses (46.5%).

The cost of inputs is the second most expected obstacle, anticipated by more than one-third (35.4%) of rural businesses—a 9 percentage-point gap compared with urban businesses (26.4%). The rural-urban gap was similar when it came to labour force shortages (24.3% of rural businesses vs. 15.5% of urban businesses), and closer but still considerable for transportation costs (25.1% vs. 17.5%).

Rural and urban businesses reported similar rates when it came to describing recruiting skilled employees (24.8% of rural businesses vs. 25.4% of urban businesses), retaining skilled employees (19.0% vs. 19.3%), and interest rates and debt costs (28.0% vs. 26.0%) as expected obstacles.

Labour-related obstacles more impactful for rural businesses

In the second quarter of 2025, among businesses that expected impacts of labour-related obstacles in the next three months, more than half of rural businesses (54.6%) expected management to work increased hours—nearly a 10-point gap compared with urban businesses (44.9%).

Also, among businesses that expected impacts of labour-related obstacles in the next three months, nearly half of rural businesses (49.5%) expected existing staff to work increased hours, compared with just over one-third of urban businesses (34.6%). Considerable proportions of rural (42.9%) and urban (39.0%) businesses said labour-related obstacles would limit their growth.

Rural businesses were also more likely to hire less suitable candidates (37.6% of rural businesses vs. 32.8% of urban businesses), encounter delays in providing goods and services to customers (30.2% vs. 24.7%), and reduce goods and services offered by the business or organization (22.3% vs. 15.4%) due to impacts of labour-related obstacles.

Similar playing fields for rural and urban businesses in current economic environment with the United States

In the second quarter of 2025, 91.0% of rural exporter businesses and 85.8% of urban exporter businesses reported sales made directly to clients or customers in the United States over the previous 12 months.

As for US tariffs imposed on imports from Canada, similar proportions of rural and urban businesses reported the impact to be high (19.0% of rural businesses vs. 17.9% of urban businesses), medium (14.1% vs. 16.8%), and low (18.8% vs. 17.3%). Proportions and breakdowns were similar for Canadian tariffs on imports from the United States.

The gap was widest between rural (11.7%) and urban (7.6%) businesses who said the elimination of trade barriers between provinces and territories would have a high impact, while there was little difference between those anticipating medium, low, unknown, or no impacts.

Businesses may have taken steps to address the impact of tariffs, even if the businesses are not being directly affected by the tariffs. Over one-quarter of rural (26.2%) and urban (26.5%) businesses said they took actions over the last three months to mitigate risks associated with any tariffs applied by the United States on Canadian imports. Additionally, similar proportions increased domestic sourcing (12.6% of rural businesses vs 11.9% of urban businesses) while rural businesses were less likely to seek alternative suppliers outside the United States (8.2% vs 13.0%).

Learn more about rural statistics

Explore data, analyses and tools focused on the vibrant rural and small-town communities and regions of Canada in our Rural Canada statistics portal.

Check out the infographic Rural and small town Canada, which was released today and gives a snapshot of population, housing, business, and access to services in rural and small town Canada.