Canada’s increasingly hostile business environment is starting to show up in the data. Office of the Superintendent of Bankruptcy (OSB) data shows a sharp increase for business insolvencies in Q1 2024. A weak consumer combined with a soaring cost of doing business has led to a surge in businesses seeking protection from creditors. Experts warn the issue is likely much worse, since the vast majority of businesses that shutter don’t make an insolvency filing, they simply close their business.
Canadian Business Insolvencies Jump 87% Higher
Canadian business insolvencies have climbed sharply over the past few months. The OSB received 2,003 business insolvency filings in Q1 2024, an increase of 31.7% from the previous quarter. First quarter filings were a whopping 87.2% higher than the same quarter last year.
Canadian Business Insolvencies
Canadian business insolvency filings in the first quarter of each year.
Source: OSB; Better Dwelling.
Canada has seen a big uptick in the number of filings over the past year. The OSB received 5,743 filings over the 12-month period ending in Q1 2024, an increase of 57% compared to a year prior. There’s a combination of factors at work here, with a weak consumer at the core of the issue.
“Over that period, the largest chunk of insolvencies was in accommodation and food services (15.5% of total), construction (13.6%) and retail trade (11.1%),” explains Shelly Kaushik, an economist at BMO.
Adding, “All three reflect discretionary spending (e.g., less renovations hitting construction), which has been struggling amid elevated interest rates.”
Canadian Business Weakness Worse Than Insolvency Data Reveals
Despite the boom in population, theoretically providing more demand, insolvency experts warn the deck is slanted against businesses. “We are seeing signs of a significant rise in distress among Canadian businesses,” says André Bolduc, the chair of CAIRP, a national insolvency organization.
He warns, “many are still shouldering the burden of the pandemic, on top of high input and labour costs, declining consumer spending, and higher debt-carrying costs.”
The end of pandemic supports have also introduced additional complexity. The interest-free period for CEBA loans granted to businesses to help navigate the downturn, has now expired. Bolduc says the costs have added an additional expense on top of those factors, making it even more difficult to operate.
Canadian businesses may also be worse off than the data implies, since not all pursue restructuring. Rather than seeking formal restructuring of debt, many owners simply choose to close their doors and cease operations, according to CAIRP.
They just want the masses to pay for rent and food to the oligarchs living in Bridle Path. Small business can’t compete if the landlord charges more rent than the revenue. Modern day feudalism. Can’t even make a profit because the commercial landlord want 5th Ave Canal St rent prices.
So if restaurants with no customers are closing, isn’t that just capitalism working?
If that were simply the case, sure.
However, most have to close even with customers. The cost of doing business in this country isn’t sustainable for anyone not a part of the few monopolies (and some of them leave too). Soaring property costs, soaring food prices, increased taxes and pricing schemes with higher salaries means higher prices which chases away new (and old) customers who have little purchasing power. A mess created by bad policies, not capitalism.
Not quite double. BUT how many businesses are Canada? At least 100,000 probably higher. Misusing statistics!
There are 1,19 million small businesses in Canada. 5000 is barely a blink
That’s the number seeking formal debt restructuring, not the total number that close which was closer to 100k.
The takeaway from insolvencies is the debt written off, not the volume of registered businesses. The latter having not much meaning, since corporations often have no employees and are strictly liability structuring.
This is what happens when the taxpayer is no longer subsidizing 75% of rent and payroll. Zombies, if not fed daily, will die.