How Canada’s economy is choking from federal regulations: 7 graphs
Regulatory reform is a rare common ground in Canadian politics. The Carney government launched a red tape review last year and reversed several Trudeau-era regulatory policies. Cabinet minister Dominic LeBlanc has publicly criticized how red tape holds back the economy, while Pierre Poilievre has made cutting it a centrepiece of his economic pitch.
A recent survey by the Business Council of Canada found that nearly half of CEOs identify the domestic regulatory burden as the single most important factor influencing their investment decisions—higher than CUSMA uncertainty—topping the list in every survey wave since 2023.
The two major federal parties may differ on their approach to solving the issue, but the shared diagnosis creates a rare opening for progress. When the government and opposition agree on the need for deregulation and the country’s business leaders rank red tape above tariffs as a barrier to investment, the scale of the problem speaks for itself.
And now the Business Council of Alberta has put a comprehensive plan on the table. From Barriers to Breakthroughs, a four-part roadmap released in late March, is the product of more than a year of research involving over 150 economists, legal experts, and business leaders. Its central conclusion is blunt: Canada’s project approval and regulatory system has become the single largest barrier to investment and prosperity in the country.
As the Council’s president, Adam Legge, put it: “Canada isn’t losing investment; we’re regulating it away.” The series offers a detailed menu of reforms, from binding project approval timelines and stronger cost-benefit analysis to risk-based regulatory design, that deserve serious consideration from policymakers.
The cross-partisan consensus is welcome. But it needs to be matched by an honest accounting of the scale of the problem, because the international evidence suggests Canada’s regulatory burden is large and a significant drag on growth.
The World Bank’s Business Ready assessment of 101 countries captures the extent of the problem. On the regulatory framework metric—the rules businesses must actually navigate—Canada ranks 33rd, closer to China than to the United States, which ranks fifth. Drill into the OECD subset, and the picture worsens. As Alicia Planincic reported, Canada earns D grades in taxation, international trade, and business location, and fails outright on market competition with a score of just 49 out of 100.
On business location—the rules governing land acquisition, property transfers, and building permits—Canada ranks dead last among 25 OECD peers. The U.S. scored 94 out of 100. Canada scored 63.
The OECD Product Market Regulation indicators confirm a troubling trajectory. Canada’s standing has deteriorated from 10th in 1998 to 26th in 2023, with particularly poor rankings on administrative burden (32nd), licensing (36th), foreign investment openness (40th), and governance of state-owned enterprises (40th).
Consider the measure on regulatory competitiveness of certain professions. On a scale from zero (most competitive) to six (least), Canada’s scores for architects, civil engineers, and real estate agents all sit well above OECD averages, ranking in the bottom quarter among 38 countries. These are professions that sit at the heart of Canada’s housing, infrastructure, and construction challenges.
On the FDI Regulatory Restrictiveness Index, which measures the extent to which countries limit foreign ownership and control across sectors of their economy, Canada scores 0.150—the highest in the G7 by a wide margin and three times the OECD average. By this measure, Canada is the most restrictive country in the G7 for foreign investment.
The domestic data tells the same story. Statistics Canada documented a 37 percent rise in federal regulatory restrictions between 2006 and 2021, a surge directly associated with a 1.7 percentage point decline in GDP growth alongside drops in business investment, dynamism, productivity, and employment.
And that is just the federal red tape tally. Using a different methodology, the Canadian Federation of Independent Business (CFIB) counts approximately 140,000 regulatory requirements in Ontario alone and nearly 146,000 in Quebec.
The cumulative cost is sobering. The CFIB’s latest estimate puts the total regulatory compliance burden for small businesses across all government levels at $51.5 billion in 2024—a 13.5 percent jump from 2020. Of that total, $17.9 billion represents pure red tape attributable to unnecessary or duplicative requirements. Businesses are burning through 768 million hours annually on regulatory paperwork, the equivalent of roughly 394,000 full-time jobs. For the average business owner, that means losing 32 working days a year to red tape alone. Small firms with fewer than five employees pay over $10,200 per employee in annual compliance costs.
The consequences show up in what doesn’t get built. The average lead time for mining projects has nearly tripled over three decades, from roughly six years in the 1990s to 17.8 years today. As of 2020, general construction permits took nearly 250 days in Canada—approximately three times longer than in the United States. Government fees on new GTA housing are three times higher than in San Francisco, Miami, New York City, and Houston.
Courts have compounded the uncertainty. The Supreme Court struck down the core of the Impact Assessment Act in 2023 as unconstitutional, leaving projects in limbo while amendments were drafted, and Alberta is challenging those amendments too. The Federal Court of Appeal quashed the Trans Mountain pipeline approval in 2018 over inadequate Indigenous consultation, years after the Northern Gateway approval was struck down on similar grounds. And in 2025, the B.C. Supreme Court’s Cowichan Tribes ruling recognized Aboriginal title over lands held in fee simple for the first time in Canadian history, creating “significant uncertainty” for property rights, investment, and regulatory authority across the province.
The cumulative effect is a legal environment where the rules of project development shift mid-process, and mobile capital goes where the rules are stable.
The potential gains from tackling the problem are well-documented. A Competition Bureau-commissioned study estimates that aligning Canada’s regulations in energy, transport, retail, and professional services with international best practices could boost GDP by 6.5 to 10 percent over the long run. The International Monetary Fund estimates that eliminating internal trade barriers alone could raise real GDP by roughly 7 percent, or $210 billion.
Canada has a rare moment of political alignment on regulatory reform. External pressure from tariff threats, capital flight, and weak economic performance has made red tape an economic imperative that transcends partisanship. But cross-partisan agreement on the diagnosis is one thing. The hard part is acting on it in a meaningful way before the political window closes and the apparatus resumes its natural expansion.
