OTTAWA — Business insolvencies surged 87.2 per cent year-over-year in the first quarter of 2024, while consumer insolvencies rose 14 per cent.
Data from the Office of the Superintendent of Bankruptcy released Friday shows business insolvencies totalled 2,003, with 1,599 of those being bankruptcies.
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) said that’s by far the largest year-over-year increase in business insolvencies in 37 years of records.
Business insolvencies rose 31.7 per cent from the fourth quarter of 2023.
The association said in a press release that it’s seeing signs of a significant rise in distress among Canadian businesses as they deal with pandemic debt, higher costs, declining consumer spending and higher interest rates.
“Now that the CEBA loan deadline has passed, businesses have the added financial burden of monthly loan repayments and their accompanying interest payments. These new debt obligations may make the future more difficult to navigate,” said CAIRP chair André Bolduc in the press release.
Small and medium-sized businesses are particularly challenged as they have fewer options for restructuring, he said. Some choose to just shut their doors instead of pursuing formal insolvency proceedings.
Consumer insolvencies during the first quarter totalled 33,885, with the majority being proposals.
“The number of consumer insolvencies returned to pre-pandemic levels this quarter, and the risk of insolvency still looms large for many Canadians,” said Bolduc.
“A perfect storm of economic challenges is brewing, with high mortgage renewal rates, soaring rental prices, and elevated costs of everyday necessities,” he added.
“The high cost of servicing debts is also compounding the financial strain for many Canadians and leaving them grappling with insurmountable debt burdens.”
An interest-rate cut from the Bank of Canada may be coming soon, but many Canadians have accumulated significant debt, including credit card debt, or have locked in higher mortgage rates, said Bolduc.
This report by The Canadian Press was first published May 3, 2024.
The Canadian Press