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Canadian business insolvency filings increased the most in 31 years last quarter, and rising interest rates could push the number even higher, according to the Canadian Association of Insolvency and Restructuring Professionals (CAIRP).

Business insolvency filings in Canada rose 33.8% in the first quarter compared with the same quarter last year, according to data from the Office of the Superintendent of Bankruptcy. There were 807 business insolvencies filed in Q1 compared with 603 in Q1 2021.

Of the 807 filings, 616 were bankruptcies and 191 were proposals. Business insolvency filings increased 10.1% in the first quarter compared with Q4 2021.

“The number of businesses becoming bankrupt or filing proposals is growing, and likely to worsen under the stress of inflation and as the cracks begin to show following the withdrawal of pandemic-related government support,” said Jean-Daniel Breton, chair of the CAIRP, in a press release.

For the 12-months ending Mar. 31, 2022, there were 2,684 business insolvencies, up 7.1% from 2,506 during the year ending Mar. 31, 2021.

Many businesses are in the recovery phase as a result of the pandemic, CAIRP noted. Supply chain disruptions and the rising costs of everything from fuel to raw materials is “putting them under further strain.”

“Budgeting for Canadian businesses has never been more challenging. Many fixed costs, such as rent and interest payments, remain due while the cash flow intended to meet these obligations has dwindled,” Breton said.

Businesses impacted by fluctuations in costs and supply chain pressures, as well as high energy users, are the most susceptible in the current environment, he noted.

Sectors accounting for the largest increase  – in the number of insolvencies during the year ending March 31, 2022 compared with the previous fiscal year – were construction, transportation and warehousing. The sectors with the biggest decreases were retail trade, real estate and rental leasing.

On the consumers’ side, there were 23,153 insolvencies filed by individuals in Canada during the first quarter of this year, up 4% from the previous quarter, but down 2.8% from Q1 2021.

Compared with Q1 2020, the number of new consumer insolvency filings is 30.3% lower than at that point, and 28.2% lower than in Q1 2019.

While quarterly consumer insolvencies remain below pre-pandemic levels, rising interest rates and inflation could start to elevate that number upwards at a faster rate, CAIRP vice-chair André Bolduc, noted in the release.

“Increasing cost-of-living on the heels of the pandemic has put many Canadians in a tough spot financially as the fallout becomes evident in the coming weeks and months,” he said, as there’s been an increase in the number of people seeking debt help as of March.

Despite only a small quarterly uptick in consumer insolvencies in the first quarter of this year, there was a 24.4% increase in filings from February to March, marking the largest monthly rate of increase in 13 years.