08:16 AM EST, 01/14/2025 (MT Newswires) -- Nearly a third (32%) of Canadian small businesses expect their capital investments to decrease over the next two years, according to a new report from the Canadian Federation of Independent Business (CFIB) released Tuesday.

Additionally, only two in five are making investments to improve their productivity, it noted.

CFIB's research has found that, when adjusted for workforce size, business investment in machinery and equipment declined by 16% -- equivalent to C$1,178 less per private sector worker -- between 2013 and 2023. This drop in investment is exacerbating Canada's productivity challenges, which already lags behind most G7 countries.

"If we don't improve our productivity and make it easier for businesses to equip workers with the tools and equipment they need to be more efficient, Canada risks falling behind its global competitors, losing entrepreneurs to other countries, and worsening the standard of living for all Canadians," said Bradlee Whidden, senior policy analyst for Western Canada and report co-author. "We will all feel the impacts, that's why governments need to act now, and fast."

Over two-thirds (69%) of businesses said equipment costs are deterring them from investing in capital, followed by the high cost of doing business (56%) and cash flow constraints (50%), stated CFIB. Nearly four in 10 small businesses (37%) in British Columbia, Saskatchewan, and Manitoba report that their inability to write off Provincial Sales Taxes is a barrier to increasing their investments.

To tackle Canada's stagnant productivity and encourage more investment, CFIB is calling on the federal government to simplify and make the Accelerated Investment Incentive and Immediate Expensing measures permanent to allow faster write-offs, as well as abandon its increase in the capital gains inclusion rate to 66.7% from 50%.