Business insolvency filings in Canada hit their largest third-quarter volume in 15 years, with 1,312 companies teetering on the brink of going under.
On a yearly basis, such filings also rose in every province but New Brunswick and Newfoundland and Labrador from Oct. 31, 2023, to Oct. 31, 2024. Ontario led the pack with a two-thirds increase, or 588 more insolvencies than a year earlier, while Quebec bankruptcies rose 40.4 per cent, an increase of 847.
The pain will continue, at least into early 2025, according to Corey Geenen, a licensed insolvency trustee and partner at Ernst and Young Inc.
“We’ve definitely seen an uptick, especially in recent months, in terms of insolvency activity,” he said.
Geenen said a number of factors are behind the increase, including a sluggish economy and decreasing demand across industries. Until very recently, companies and consumers were also contending with rising interest rates and inflation.
“People have been tightening their budgets, and inflation just kind of permeated throughout the rest of the economy,” he said.
The pandemic had a historically low level of insolvency filings — which include bankruptcy and restructuring procedures — because government supports kicked in, but things started to normalize in 2023 and have continued through 2024.
“Insolvency activity was slower than expected over the past few years, especially over the COVID-19 period. Yes, there were a few large restructurings, mainly in the retail sector, but other than that it was quite quiet,” Geenen said, adding that some businesses that received a lot of funding during the pandemic were probably in business longer than they would have been otherwise. “I would say that what we’re seeing is a bit of catchup, almost.”
The federal government early in 2024 said a quarter of the small businesses that had received money under the Canadian Emergency Business Account program had not met the repayment deadline.
Insolvencies have permeated a variety of sectors, from retail and real estate to service and hospitality, and, to a lesser extent, life sciences, Geenen said.
The hardest-hit sectors in the third quarter compared to a year ago were construction (with insolvency filings up 37 per cent), accommodation and food services (up 32 per cent), and transportation and warehousing (up 28 per cent), according to the Canadian Association of Insolvency and Restructuring Professionals.
The construction sector had for the largest share of insolvencies in the third quarter at 15.4 per cent.
One Toronto-based licensed insolvency trustee, whose firm specializes in restructurings, said the real estate industry was hit by a perfect storm of conditions, but insolvencies were driven mostly by high interest rates throughout much of the year and increasing construction costs.