Business insolvencies had the sharpest increase in more than three decades last year, according to a new report, which highlights that Canadian firms are struggling with higher debt-carrying costs. 

A new report released Friday from the Canadian Association of Insolvency and Restructuring Professionals (CAIRP) found that business insolvencies in Canada rose by 41.4 per cent in 2023 when compared to the previous year. The rise marked the largest annual increase based on 36 years of records from the Office of the Superintendent of Bankruptcy (OSB). 

“Businesses have been struggling to cope with a myriad of financial challenges over the past year, including higher input costs, wage costs, and debt servicing costs, exacerbating the rocky footing many have been on ever since the pandemic,” Andre Bolduc, the chair of CAIRP, said in a press release. 

In total, 4,810 businesses filed for insolvency during 2023, which marked the largest annual volume in 13 years, the release said. 

According to Bolduc, debt accumulated during pandemic lockdowns wore down Canadian businesses. He said that in some instances, debt levels hurt the viability of businesses, requiring them to seek restructuring options. 

Across provinces, Newfoundland and Labrador had the highest percentage increase in insolvencies last year at 141.7 per cent, followed by British Columbia at 65.4 per cent and Nova Scotia at 55.6 per cent. 

Bolduc said businesses will continue to face a difficult environment this year. 

“Many businesses are already on a razor’s edge. The additional costs to service their debts due to higher interest rates will mean even less room to cover increasing costs of business going into 2024,” he said. 

Consumer insolvencies 

The report also highlighted that consumer insolvencies rose 23 per cent during 2023, which marked the fastest rate of increase in 14 years. 

Over the course of last year, the report said 123,000 Canadian consumers filed for insolvency, with a daily average of around 337. 

“Compounding the financial impacts of inflation and higher interest rates, many Canadians have not seen their income grow at the same pace as the cost of their daily expenses, making it increasingly difficult to manage bills and service debts,” Bolduc said. 

“Without additional sources of income or a pay raise, households may feel they need to cut back further on spending habits or take on more debt to keep pace.”

Across provinces, Manitoba was found to have the highest percentage increase of consumer insolvencies last year, at 30.7 per cent, followed by British Columbia at 26.8 per cent and Ontario at 26.2 per cent.