Canadian businesses aren’t just increasingly closing up shop, but they’re facing debt problems too. Office of The Superintendent of Bankruptcies (OSB) data shows business insolvencies surged in January. A combination of a slowing economy, rising input costs, soaring debt, and end of pandemic assistance has led to the biggest month for business insolvencies in nearly 20 years.
Canadian Business Insolvencies Just Hit A 19-Year High
Canadian business insolvencies are making up for lost time. The OSB received 759 insolvency files in January, about 42% more than filed a month before. Compared to the same month last year, this represents a whopping 129% jump. It’s easy to dismiss monthly movements as volatile due to the seasonal nature of insolvency filings. However, the annual surge is a big red flag that deserves a deeper dive into the data.
Historical data provides some context into how unusually large last January was. It wasn’t just big for the time of year, but Canada hasn’t seen a single month this large in 19 years. It was the largest move in nearly a generation.
The 12-month sum of insolvencies shows the trend is not Canada’s friend here. Businesses made 5,238 insolvency filings over the 12-month period ending January 2024. That’s 49% higher than they were a year prior. It’s another indicator for the country’s economy, anyway you cut it.
Canada’s Economy Is Slowing, Don’t Expect A Rebound Says Big Six
One of the country’s Big Six banks attributes this to the country’s slowing economy. National Bank of Canada (NBF) points to the paltry 1% annualized real GDP growth in Q4 2023 as a warning sign.
“Looking ahead, don’t expect much of a rebound in 2024,” writes Stéfane Marion, chief economist at NBF. “While January’s increase [in business insolvencies] was certainly exacerbated by the end of COVID-era subsidy programs, restrictive monetary policy is certainly playing a role as well.”
The insolvency issue is just part of the growing picture of an eroding business landscape. Insolvency is a formal debt mitigation tool, but even more businesses are just shuttering their doors. At the same time, despite a surge in population, fewer people are starting new businesses. An issue that makes more and more sense as investors see more opportunity abroad than they do in Canada’s debt heavy, housing economy.
Never say ill about the dead but Brian Mulroney former Conservative PM recently deceased added the dreaded HST to his legacy.
Justin Trudeau surely has a lot to do with massive decline in business,foreign investment sinking Canada into quagmire.
Pierre Poilievre may have to be a Houdini.
But if it’s one person who can make an impact Pierre is definitely the one.