In the past year, more Thunder Bay businesses have closed than opened, prompting calls for a national inflation plan

Both Hands Wood-Fired Pizzeria and Bakery has been a popular pizzeria in Thunder Bay, Ontario for over 20 years, with owners Derek Lucchese and Sue Holloway baking handmade pizza, bread, and granola in their large wood-fired oven for loyal customers.

But on July 1, Derek and Sue would hand over the restaurant keys to Paul Gibson and Michelle Murdoch-Gibson of Rowan Tree Collective.

While Lucchese felt it was time to leave the restaurant, he said he’d be lying if inflation hadn’t impacted his business tremendously financially.

“Frankly, we haven’t kept up with inflation and our ingredient prices to the extent that they’ve gone up,” Lucchese said, “partly because they’ve changed so often. It costs money for signage and to constantly update everything. So that really has made a huge impact on us.”

Lucchese said inflation hasn’t made things any easier over the past year, and he’s still feeling the impact of the COVID-19 pandemic.

“I would say we’re maybe only halfway or three-quarters of the way back to ‘normal’ pre-pandemic times, especially for the dining portion of our restaurant. Either people have moved and are visiting other places, or they’re still not feeling at ease or they don’t want to eat out like before.”

Businesses facing ‘economic pressure’

Lucchese and Holloway are not the only entrepreneurs who have felt the impact of inflation.

Since last July, more businesses have closed in Thunder Bay than opened. According to a Statistics Canada data analysis by Karl Skogstad, an economist at Lakehead University, an average of six more businesses closed per month than opened.

Overall, monthly data for the first half of 2022 shows that new businesses closed more than closures.

While the data doesn’t give a rationale for the closures and doesn’t paint a complete picture, it could point to what a tough year it has been amid high inflation, he said.

“This net loss could be a normal occurrence, part of a larger cycle the region is going through, or it could be a result of the economic pressures we are facing.”

Skogstad said high inflation creates a challenging market for companies.

“Inflation is high, costs are rising and in economics, when we think about high inflation, there is so much uncertainty,” Skogstad said.

Consequently, he said, inflation has created a tricky situation.

“Inflation hurts people, and because businesses are owned by people, it hurts entrepreneurs too.”

There’s not much that can be done locally to ease inflationary pressures, Skogstad said. Since inflation is a national issue and not just affecting Thunder Bay, there must be a national approach to solving the problem, he said.

“There is no painless solution, because if there was, we would have implemented it.”

Closures in other cities as well due to rising costs

Shops have closed across Canada due to the constantly rising cost of rent and living.

in Ontario, businesses on Toronto’s Roncesvalles Avenue recently closed their doors because they couldn’t afford a 30 percent rent increase.

Other small businesses in Windsor-Essex are struggling to survive due to rising grocery prices forcing customers to change their purchasing habits.

Canada’s inflation slowed to 3.4 percent in the year to May, Statistics Canada said last week, the lowest level in nearly two years and a sharp drop from April’s 4.4 percent rate.

The Bank of Canada has been aggressive rate hikes in recent months in an effort to contain inflation. The theory is that as rates rise, consumers will be pressured by higher debt payments.

With more money going towards paying off their debts, Canadians have less to spend elsewhere. That slows the economy and depresses prices

Skogstad added that he believes there is no clear policy that could help some struggling companies without harming others. He said one option could be for the government to make payments to any company in trouble, but that money will ultimately come from taxpayers.

“You could do that, but just understand that you’re helping one group and harming another group. We call that a ‘transfer’ in economics. So if you’re okay with that, of course you can have that policy, but I bet that there are people who won’t like it.”

“A lot has to go,” says the shopkeeper

Danielle and Joey Roy have been co-owners of the Authentique gift shop for five years. Due to the increase in the cost of living, Danielle said, they had to raise their prices.

“A lot of things have had to go, a lot of our products have gone up in price and we’ve always prided ourselves on having really reasonable prices. But we just can’t fight it.”

Danielle added that many retail items are made in China, meaning rising shipping and container costs have forced the Roys to raise their prices.

Joey said he and Danielle are “some of the lucky ones” because they can still successfully run their businesses while managing inflation themselves.

“I think it’s the people who are just on the edge of what they can meet financially that would hurt more,” said Joey. “We haven’t reached the threshold where we feel really cracked. So luckily for us, our business is versatile enough that the business is still good enough.”

As for Lucchese, he said he’s also had to raise prices a few times and knows that rising costs impact his customers as much as he and his family.

“It’s a real drag in that way, but the reality is that in order to keep up with that, we really should have raised our prices a lot more and a lot more often. So we just got the best we can.”

As Lucchese prepared to leave Both Hands, he said the reality for him and his family is that they have tried to hold on.

“We just tried to sail out as much as we could. It affected us on both sides, and realistically if our intention was to keep running the business, we probably would have raised our prices more aggressively and made some other changes to try to keep up.”