(Ottawa) Business insolvencies jumped 87.2% year-on-year in the first quarter of 2024, while consumer insolvencies increased 14%.
Data from the Office of the Superintendent of Bankruptcy released Friday show that corporate insolvencies totaled 2,003, of which 1,599 were bankruptcies.
The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) said this is by far the largest year-over-year increase in corporate insolvencies in 37 years of data compilations.
Corporate insolvencies increased by 31.7% compared to the fourth quarter of 2023.
The association said in a news release that it is seeing signs of a significant increase in distress among Canadian businesses as they deal with pandemic debt, rising costs, falling spending consumption and rising interest rates.
With the deadline for repayment of the Canadian Emergency Business Account having passed, businesses must face the additional financial burden of monthly loan repayments and the interest that goes with them, according to CAIRP President André Bolduc.
This new debt reality could make the future more difficult to manage, he says. Small and medium-sized businesses particularly face difficulties because they have fewer restructuring options, argues Mr. Bolduc. Some simply choose to close their doors rather than initiate formal insolvency proceedings.
Consumer insolvencies during the first quarter totaled 33,885, the majority being proposals. This number is equivalent to pre-pandemic levels and the risk of insolvency remains significant for many Canadians, says Mr. Bolduc.
It points to “a perfect storm of economic challenges” brewing, with high mortgage renewal rates, rising rental prices and high costs for basic necessities.
The debt burden is also adding to the financial burden for many Canadians, leaving them with an “insurmountable debt burden,” he adds.
A Bank of Canada interest rate cut may be imminent, but many Canadians have accumulated significant debt, including credit card debt, or have set themselves higher mortgage rates, Bolduc said.