Insolvencies rose 12.1 per-cent last year compared with 2023, primarily driven by small- to medium-sized businesses.
Canadian business insolvencies saw a pronounced increase of 28.6 per cent last year, compared with 2023, according to data from the Office of the Superintendent of Bankruptcy.
It’s worth noting that last year about 375 insolvencies occurred each day, marking a 15-year high across both business and consumer sectors.
Businesses that suffered the most were construction, food services, accommodation, transportation and warehousing.
However, “mining, quarrying, and oil and gas extraction showed decreases in the number of insolvencies,” it said.
Systems Business Coach Beverlee Rasmussen said that both 2023 and 2024 were particularly “tough years for small businesses in Canada.”
“The CEBA loans had to be paid back by the first week of January 2023,” Rasmussen told True North. “Small business owners were already dealing with a heavy debt load coming out of Covid and interest rates are double what they were the year prior. Imagine your interest expense doubling or tripling when you’re already on the edge.”
While the Bank of Canada recently reduced its key interest rate to three per cent to mitigate the country’s weak economy, businesses that managed to survive an economically tumultuous 2024 will now have to contend with the threat of U.S. tariffs and mortgage renewals.
“Of course, when you cool inflation, you cool sales, put the squeeze on consumers by raising their mortgage rates, now instead of going out for dinner once a week they’re doing it once a month or not going out at all. Every last customer to a restaurant has an impact,” said Ramussen.
She also noted that certain changes to the minimum wage have strained small business owners.
“Consider that a one-dollar-an-hour raise to employees equals $2500 a year out of the business owner’s pocket. Lots of demand for higher wages to retain employees. Most provinces had a minimum wage increase,” said Rasmussen.
“This next one might not sound like a big deal but business owners by law have to pay for five sick days. The employees think the government is paying for it and so many have shared with me that their employees want to take those days off just to get the benefit, not realizing it’s coming out of the owner’s pocket.”
Insolvency filings increased 5.2 per cent in the fourth quarter of last year, bringing its year-over-year to more than 35,000.
Consumer insolvencies led the charge in Q4 with an increase of 6.1 per cent, while business insolvencies saw a dip of 12.4 per cent.
“Where we fall down is not supporting the business owner who’s been around for a few years, has customers, has a viable product in the market, has hired employees and is over their head,” said Rasmussen.
The Conservatives released a statement in response to the latest data, accusing the Trudeau government of making everything more expensive and tougher for businesses and consumers to stay afloat by driving up the country’s deficit to $61.9 billion.
“This has had devastating consequences for working Canadians. Businesses are closing after the Liberals hiked their capital gains tax and increased the carbon tax,” said the Conservatives.
“And as many as 50 percent of Canadians are now $200 or less away from not being able to pay their bills. The Royal Bank of Canada also revealed last month that 55 percent of Canadians are ‘feeling paralyzed.’”
