Insolvencies to remain high in Canada as economy plays catch-up: experts

Business insolvencies will likely remain elevated throughout 2024, experts said, as the economy plays catch-up after historically low levels during the pandemic. 

Business insolvencies will likely remain elevated throughout 2024, experts said, as the economy plays catch-up after historically low levels during the pandemic.

“We did have … so many years of artificially low filings. We’ve got a fair bit of catch-up to do,” said Natasha MacParland, a partner at Davies Ward Phillips & Vineberg LLP.

The pandemic saw a historically low level of insolvency filings — which include bankruptcy and restructuring procedures — as government supports kicked in but in 2023 things started to normalize, said MacParland. That trend is continuing into 2024.

Business insolvencies in 2023 were up 41.4 per cent compared with 2022, according to data from the Office of the Superintendent of Bankruptcy. Compared with 2019, they were up almost 31 per cent.

At some point in the latter half of 2023, business insolvencies started surpassing pre-pandemic, or 2019, levels. But that’s not necessarily a worrying thing, MacParland said.

“I would have been concerned if all of a sudden there was a deluge of filings. But this seems to me to be what I would have expected,” she said.

She also noted 2019 was a milder year for insolvency filings, and that a certain level of insolvencies is healthy for the economy.

Insolvency, which a business often faces when it’s unable to pay its debt and other expenses, includes both bankruptcies and proposals. Bankruptcies mean the business is closing down, while a proposal offers a way to restructure.