Businesses experienced a sharp increase in bankruptcies in the last quarter of 2021 according to the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
Insolvencies were up by 36.8% across the board during last year’s fourth quarter, marking a 35-year high. The brunt of the damage was caused by closures in the food, accommodation and construction industries.
“After nearly two years of record-low business insolvencies, the persistent uncertainty caused by the COVID situation is now forcing difficult decisions from Canadian business owners who are operating in the face of increased costs, supply chain issues and a tapering of pandemic-related government support,” said Jean-Daniel Breton, Chair of CAIRP in a news release.
“The figures do not tell the whole story because owners of small, fragile companies that were surviving through low-interest rates and government support may decide to walk away rather than consider insolvency or restructuring options.”
During the period, 733 businesses commenced insolvency proceedings.
According to CAIRP, revenues have not yet returned to pre-pandemic levels for many struggling industries.
Consumer insolvencies are also up by 5.5% compared to the previous quarter, with 22,266 individuals filing bankruptcies at the tail end of 2021.
“We may not start to see consumer insolvencies return to pre-pandemic levels until later in 2022, as the tightening of monetary policy and interest rate hikes apply pressure to personal finances,” said André Bolduc, Vice-Chair of CAIRP.
Recent statistics show that nearly half of Canadians are struggling to pay off their debts and monthly bills.
According to the latest MNP Consumer Debt Index, 43% of those polled reported struggling with their personal finances, while 45% were worried they couldn’t meet their living expenses.
“Unexpected expenses are one of the biggest contributors to household financial turmoil, and many are starting the new year being dealt another round of unexpected business closures, reduced working hours or job loss, and COVID-related health concerns,” said MNP LTD president Grant Bazian.