Canada’s investment industry leaders expect weak economic conditions to continue in 2016, and ever-rising operating costs to result in continued consolidation in the coming year.

In fact, 51.4% expect to face similar weak economic conditions in 2016, finds an IIAC survey. Only one-in-five expect economic conditions to improve this year, while 28.6% anticipate conditions to worsen.

When asked about the top three major trends transforming the investment industry, a majority of CEOs answered regulatory changes (86%), industry restructuring (74%), and demographics (60%). These three themes emerge time and again as CEOs address questions related to operating costs and revenue.

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Roughly half of CEOs (47.5%) expect operating costs to rise more rapidly in 2016 compared to 2015.

“Higher compliance and technology costs account for much of this escalation,” says Ian Russell, IIAC President and CEO. “These costs are estimated to have risen seven% in 2015, compared to a 6% increase the previous year. While most firms project revenue will increase in 2016, the relentless rise in operating costs will squeeze profitability.”

He adds, “As a result, Canada’s investment industry will continue to experience consolidation, with firms merging or shutting down operations. This consolidation severely damages the viability of the public venture marketplace.”

When asked how this restructuring is likely to unfold, 37% of CEOs expect industry consolidation to intensify in the next two years while 23% say it’ll remain about the same as 2014 to 2015. And 40% expect the rate of consolidation to slow.

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The survey also put a spotlight on Canada’s small business marketplace. 2016 is expected to be another bleak year, as 88% of CEOs do not expect any improvement in Canada’s small-cap public venture capital market.

“This market is already in the throes of massive structural change and is unlikely to see a return to the old model,” says Russell. “However, we know that capital markets are innovative and flexible. As they have in the past, market participants will adapt to the pressures, but it will take time for a new efficient model to emerge.”

Also, 59% of CEOs do not expect 2016 to be another strong year in the Canadian private equity market.