Report 2023 Sees Record Increase in Business Insolvencies

15 Feb, 2024

Report 2023 Sees Record Increase in Business Insolvencies

Business insolvencies experienced a significant surge in 2023, marking the sharpest increase in over three decades, as indicated by a recent report. Canadian businesses grappled with elevated debt-carrying burdens amidst challenging financial landscapes. The Canadian Association of Insolvency and Restructuring Professionals (CAIRP) unveiled findings revealing a 41.4 per cent surge in business insolvencies in 2023 compared to the preceding year. This escalation represents the largest annual upswing in 36 years, derived from records compiled by the Office of the Superintendent of Bankruptcy (OSB).

Andre Bolduc, CAIRP's chair, emphasized the multifaceted financial hurdles businesses encountered, such as escalating input, wage, and debt servicing costs, magnifying the strain amplified by the pandemic's enduring impact. Last year, 4,810 businesses filed for insolvency, the highest annual volume in 13 years. Mounting debt during pandemic-induced lockdowns compromised the sustainability of numerous Canadian businesses, necessitating recourse to restructuring alternatives.

Regional disparities were notable, with Newfoundland and Labrador experiencing a staggering 141.7 per cent increase in insolvencies, trailed by British Columbia at 65.4 per cent and Nova Scotia at 55.6 per cent. Bolduc forewarned of persisting challenges, especially with higher interest rates amplifying debt servicing costs in 2024.

Furthermore, consumer insolvencies surged by 23 per cent in 2023, marking the swiftest escalation in 14 years. Approximately 123,000 Canadian consumers filed for insolvency, with Manitoba, British Columbia, and Ontario witnessing the highest percentage increases. Bolduc underscored the strain on households, accentuated by stagnant incomes vis-à-vis escalating living expenses, potentially necessitating drastic spending cutbacks or additional debt acquisition to navigate financial constraints