Canadian business insolvency filings in the third quarter reached a level not seen since the financial crisis, according to data from the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).
Business insolvency filings reached 1,312 during the third quarter of this year, CAIRP said in a press release Tuesday, marking the largest volume in the third quarter since the 2009 Great Recession. The increase marks a 16.2 per cent increase year-over-year, but a 14.9 per cent drop compared to the previous quarter, suggesting lower borrowing costs and easing inflation are providing some relief.
“Although quarterly business insolvencies have continued to increase year-over-year, the drop from the previous quarter this year suggests that some businesses are beginning to adjust to the current economic conditions,” André Bolduc, a licensed insolvency trustee and CAIRP chair, said in the release.
“The recent declines in interest rates and resulting lower financing costs could be easing some of the margin pressures for businesses.”
According to CAIRP, businesses insolvencies during the third quarter remained 58.6 per cent higher than the level seen before the COVID-19 pandemic in the third quarter of 2019. Monthly data also showed business insolvencies during the month of September rose 11.5 per cent from the previous year and 8.3 per cent compared to August of this year.
Some of the sectors that saw the largest number of business insolvencies during the third quarter of this year compared to the previous year were construction, accommodation and food services, as well as transportation and warehousing.
“After years of navigating economic turbulence, some business owners may be experiencing ‘director fatigue,’” Bolduc said.
“The constant pressure to adapt to shifting conditions can be challenging and draining, and for some, closing their doors may feel like the only path forward amid ongoing uncertainty.”