CAIRP: 2023 Annual & Q4 Canadian Insolvency Statistics
TORONTO – February 2, 2024 – Business insolvencies in Canada surged by 41.4% in 2023 compared to the previous year, the sharpest increase in 36 years of records from the Office of the Superintendent of Bankruptcy (OSB). Some 4,810 businesses filed insolvencies in 2023, the highest annual volume in 13 years, a sign companies are struggling with higher debt-carrying and other costs. Business insolvency filings rose 34.7% in the fourth quarter of 2023 compared to the previous quarter, and more than doubled (51.6%) compared to the same quarter of 2022.
“Businesses have been struggling to cope with a myriad of financial challenges over the past year, including higher input costs, wage costs, and debt servicing costs, exacerbating the rocky footing many have been on ever since the pandemic,” says André Bolduc, Licensed Insolvency Trustee and Chair of the Canadian Association of Insolvency and Restructuring Professionals (CAIRP), the national voice on insolvency matters in Canada.
Bolduc says debt accumulated by businesses during the pandemic lockdowns, including CEBA loans, are weighing heavily on many Canadian businesses and, in some cases, making them no longer viable or in need of debt restructuring options.
“Interest rates have made borrowing more expensive over the past year. The recent CEBA loan deadline put additional pressure on many businesses,” explains Bolduc.
As of January 19th, business owners who were unable to repay their CEBA loans are now incurring a five percent interest charge and must make monthly payments on what was previously an interest-free loan with no monthly payments. Simultaneously, business owners who rushed to find alternative financing to pay their government loan by the January deadline or refinanced to pay the loan by March 28th to receive partial debt forgiveness, are now facing higher interest rates on their remaining debt.
“Business owners were forced to make difficult decisions such as taking on higher interest loans to get their CEBA loan paid in time in order to take advantage of the partial debt forgiveness. Others who were unable to pay in time are now accruing five percent interest on their CEBA loan,” explains Bolduc. “Many businesses are already on a razor’s edge. The additional costs to service their debts will mean even less room to cover increasing costs of business going into 2024.”
Weakened consumer spending is also making it challenging for some businesses to increase their sales and offset the additional debt servicing costs and other financial pressures.
“Some businesses may not be able to manage the increases to their monthly bills, especially if they are already finding it difficult to drum up sales. That strain, combined with any additional financial challenges or setbacks this year could force businesses to shutter,” says Bolduc.
The latest numbers from Statistics Canada show there were 44,236 business closures in October 2023. Compared to the previous month, the change in business closures in October were highest in the retail trade (+157), construction (+105) and transportation and warehousing (+93).
“Often, we see business owners close up shop and simply walk away rather than taking formal steps to wind the business down or get restructuring advice. These business owners are missing out on professional guidance on restructuring and corporate workouts that could preserve the ongoing business operations,” explains Bolduc.
To explore all viable options, Canadian business owners should seek professional advice from Licensed Insolvency Trustees. They are uniquely qualified to provide customized guidance depending on the business’ size, structure, and assets.
Across the provinces, Newfoundland and Labrador had the highest rate of increase in business insolvencies in 2023, increasing 141.7% to 29 filings. This was followed by a 65.4% increase to 253 filings in British Columbia, and a 55.6% increase to 42 filings in Nova Scotia.
Key business insolvency stats:
- Annual business insolvencies surged by 41.4% in 2023.
- Business insolvencies rose 34.7% in the fourth quarter of 2023 compared to the previous quarter.
- Business insolvency filings increased 51.6% in the fourth quarter of 2023 compared to the same quarter of 2022.
- Newfoundland and Labrador (+141.7%), British Columbia (+65.4%), and Nova Scotia (+55.6%) had the highest rates of increase in business insolvencies in 2023.
Consumer insolvencies in 2023 rose 23.0%, the highest rate of increase since 2009
Annual consumer insolvency filings for 2023 increased 23.0%, the fastest rate of increase in 14 years, highlighting the increasing financial pressures faced by Canadians. An average of about 337 Canadians filed for insolvency each day in 2023, over 123,000 consumer insolvencies for the year.
In the fourth quarter of 2023, consumer insolvencies increased 4.4% compared to the previous quarter. Consumer insolvency filings grew 22.9% in the fourth quarter of 2023 compared to the same quarter of 2022.
“Compounding the financial impacts of inflation and higher interest rates, many Canadians have not seen their income grow at the same pace as the cost of their daily expenses, making it increasingly difficult to manage bills and service debts,” explains Bolduc. “Without additional sources of income or a pay raise, households may feel they need to cut back further on spending habits or take on more debt to keep pace.”
Other factors including job losses or employment changes in certain sectors could cause additional strain on households.
“Job loss or changes such as reduced working hours can be major contributors to insolvency,” says Bolduc. “Many households simply don’t have the emergency savings to help supplement the income loss and weather those periods of financial instability.”
Additionally, mortgage renewals may also emerge as a catalyst for a continued upward trend in insolvencies. As renewals approach, homeowners managing now at low-interest rates may not be able to keep up with further increases in monthly expenses.
“Those who are unable to supplement their income sufficiently to meet the additional costs of their mortgage at higher rates in the long term could be at risk of insolvency,” explains Bolduc.
“Individuals struggling to make ends meet often feel helpless but there is help available. Licensed Insolvency Trustees are federally regulated debt professionals with legal authority to negotiate binding agreements with creditors on your behalf. They are required to provide unbiased advice and information about all the debt relief options available. Those options can include a consumer proposal or bankruptcy, which can only be administered by a Licensed Insolvency Trustee.”
Licensed Insolvency Trustees generally offer free consultations and are available across the country, even in remote locations. To find a government-regulated Licensed Insolvency Trustee visit: www.cairp.ca/find-a-lit.html
Comparing the provinces, Manitoba had the highest rate of increase in consumer insolvencies in 2023, rising 30.7% to 3,623 filings. This was followed by British Columbia which experienced a 26.8% increase to 12,896 filings, and Ontario which saw a 26.2% increase to 43,831 filings.
Key consumer insolvency stats:
- Annual consumer insolvencies increased by 23.0% in 2023.
- Consumer insolvencies increased 4.4% in the fourth quarter of 2023 compared to the previous quarter.
- Consumer insolvency filings grew 22.9% in the fourth quarter of 2023 compared to the same quarter of 2022.
- Manitoba (+30.7%), British Columbia (+26.8%), and Ontario (26.2%) had the highest rate of increase in consumer insolvencies in 2023.
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