Businesses want Federal Budget 2026 to help them compete from a position of strength

The survey reveals that 71 per cent of business leaders are confident this budget will be business-friendly and improve their company’s growth prospects. These findings align with KPMG’s recent National Business Outlook and Trade Survey, which revealed a majority of companies are generally supportive of the federal government’s economic agenda but want to see results.

Business leaders identified the most pressing issues facing Canada's economy right now that the upcoming federal budget should take into account as:

• 62 per cent: Canada–U.S. trade conflict and tariff impacts
• 44 per cent: Attracting foreign investment and retaining capital in Canada
• 34 per cent: Accelerating major projects (e.g., energy, infrastructure)
• 34 per cent: Cost pressures on businesses and households
• 26 per cent: Tax competitiveness/reform and reducing red tape

Nonetheless, smaller businesses are less confident that the budget will address their needs. Only 54 per cent of businesses with revenue between $10 million and below $100 million are confident the budget will support growth, compared with 82 per cent of businesses earning $1 billion or more.

Despite slower economic growth and volatile geopolitical conditions, business leaders are pragmatic rather than pessimistic. In the short term, 59 per cent are expressing optimism about the Canadian economy over the next 12 months, whereas 67 per cent are confident in Canada’s growth prospects over the next three years. This is consistent with KPMG’s CEO Outlook, which surveyed the leaders of large corporations and found that 69 per cent are confident about the Canadian economy over the next three years – a decline from past years – although CEOs have higher confidence in their own company’s outlook.

While two-thirds of business leaders (66 per cent) say their organization is adapting successfully to higher trade barriers and geopolitical risks, smaller firms are finding the ability to adapt more difficult. Just 51 per cent of businesses under $100 million report adapting successfully, compared with 77 per cent of companies generating $1 billion or more in annual revenue.

Business leaders agree that targeted tax incentives are important, however they are not enough on their own to boost productivity and ensure Canada’s tax system is fit for a changing economy. Nearly nine in 10 (87 per cent) want the federal government to conduct a comprehensive review of Canada's tax system; 85 per cent feel Canada’s tax system should be simplified to reduce complexity; and 82 per cent feel Canada needs to make the tax system more competitive.

" The government has already announced changes to fine-tune the tax system to support business investment, but it’s happening at a time when the business community’s calls for a broader overhaul of the tax system grow louder,” says Lachlan Wolfers, National Leader, KPMG Law. “While tax incentives can help drive specific outcomes, they are no substitute for comprehensive tax reform that improves competitiveness and reinvigorates the economy.”

While the U.S. remains Canada’s dominant trading partner, diversification has emerged as a business priority. More than three-quarters (76 per cent) say diversifying markets beyond the U.S. is more important than it was six months ago, while 84 per cent believe Canada is right to pursue a special partnership with the European Union and other stable trade partners. These findings reinforce the importance of the federal budget in accelerating efforts to expand market access amid ongoing uncertainty.

• 72 per cent think Canada should hold out for a better trade deal, even if doing so creates some economic pain
• 68 per cent are optimistic that new trade deals with non-U.S. partners will improve prospects for their business (e.g., the UK, the EU, India)
• 77 per cent say Canada was right to suspend trade talks with the U.S. and impose counter-tariffs
• 45 per cent say Canada should return to negotiations only when a better deal is achievable
• 23 per cent say Canada should return to trade talks immediately without any preconditions

“A majority of business leaders are prepared to be patient and wait to secure a trade deal with the U.S. until more favourable terms are available,” says Robert Glasgow, Partner, Trade and Customs practice, KPMG Law. “This finding is striking given that nearly seven in 10 leaders say mounting U.S. tariffs are forcing them to pass on significantly higher costs to their customers and clients.”

While there is still solid support for the government’s decision to withdraw from the trade talks in August, the economic impact of Canada’s counter-tariffs is being felt across industries. More than half (55 per cent) of leaders say the measures are creating significant challenges for their business, rising to 67 per cent in the retail and wholesale trade sectors and 64 per cent in the agriculture, automotive, construction, and manufacturing sectors.

Notably, some sectors see more opportunity in having access to markets abroad than others. For example, technology businesses are particularly optimistic that Canada’s new trade agreements and partnerships will improve their prospects (80 per cent versus 68 per cent overall).

“The federal budget needs to give business leaders the confidence to act and the tools to make their businesses more competitive as Canada's economy adapts and undergoes a major transition,” Mr. Glasgow concludes.