The article discusses the surge in bankruptcies and insolvencies in Canada, particularly in 2024. According to data from various sources, including the Canadian Association of Insolvency and Restructuring Professionals, there has been a significant increase in insolvency filings across various sectors, including construction, accommodation and food services, transportation and warehousing, and real estate.
The article highlights several factors contributing to this trend, including:
- High interest rates: The Bank of Canada’s decision to raise interest rates throughout the year made it more expensive for businesses and individuals to borrow money.
- Increasing construction costs: As the demand for housing increased, so did the cost of building materials and labor, making it difficult for developers to stay afloat.
- Perfect storm in real estate: A combination of high interest rates, increasing construction costs, and declining demand for new homes contributed to a significant increase in insolvencies in the real estate industry.
- Multinational companies taking advantage of Canada’s bankruptcy regime: Companies based in the United States are filing for bankruptcy in Canada rather than south of the border because it is a more cost-effective process.
The article also quotes experts, including Toronto-based licensed insolvency trustee, who expect the current trend to continue into 2025. Geenen, a licensed insolvency trustee, believes that the beginning of 2025 will be "fairly busy" due to ongoing uncertainty in Ottawa and potential instability following the U.S. election.
Key statistics mentioned in the article include:
- Insolvencies in construction sector increased by 37% compared to last year.
- Accommodation and food services saw a 32% increase in insolvencies.
- Transportation and warehousing experienced a 28% rise in insolvencies.
- The number of producer bankruptcies, receiverships, creditor proposals, and filings under the Companies’ Creditors Arrangement Act (CCAA) was greater in 2024 than in the previous two years combined.
Overall, the article suggests that Canada’s economy is facing significant challenges, including high interest rates, rising construction costs, and uncertainty in Ottawa, which may continue to drive insolvencies in various sectors.
