Canadian business insolvencies up 37.2% in 2022, consumer insolvencies up 11.2%

“I wish I could say it was a shock but we have been predicting for some time that the pandemic damage would be back-end loaded and that we would see business failures pick up, not so much during the worst of the pandemic, but following it — and that seems to be happening,” said Dan Kelly, president and chief executive of the Canadian Federation of Independent Business (CFIB).

Only half of the members of his organization, which represents 97,000 small and medium-sized businesses, have seen their sales return to pre-pandemic levels, it said.

Even those that have seen a sales rebound are still facing elevated inflation and interest rates, labour shortages and supply chain challenges that have driven up costs and made operations more difficult.

When Kelly speaks with business owners, he hears the pressure they are under is “enormous” because two-thirds still have COVID-19 debt, which he says averages $114,000.

A large chunk of that debt is from the Canada Emergency Business Account, interest-free and partially forgivable loans the federal government gave to nearly 900,000 small businesses and not-for-profit organizations, he said.

While the loans kept the businesses alive, Kelly said the repayment schedule is proving difficult to manage for many of them.

Though the deadline was recently shifted back to Dec. 31, 2023 and the CFIB is pushing for another extension, he said many companies would need to earn above their pre-pandemic sales levels to get that cash together in time.

“Forty thousand dollars or $60,000 may not sound like a ton of money for a business, but for very small business it can make the difference if you are making decisions about your future,” he said.

“We worry it may push some of them into the column of seeing their business close or wind down.”

Those most at risk are in the accommodations and food services business, he said, which the office of the superintendent revealed had the biggest increases in insolvencies in the last year, along with the construction industry.

The sectors that saw the biggest drop were mining and oil and gas extraction, and finance and insurance.

Kelly fears the bankruptcies and insolvencies the office counted are only a fraction of the businesses which had to close. For every business that goes bankrupt, nine close through an orderly wind down or a shutdown, he said.

Even more troubling, he said, is his prediction that the closures will continue.

“I don’t believe we have hit the high water mark,” he said. “We are likely to see this continue to rise over the months ahead.”

Along with business figures, the office tracked Insolvency filings by consumers in 2022 and found they totalled 100,184, up 11.2% from 90,092 in 2021.

The consumer figures included 24,586 bankruptcies, down from 27,461 in the previous year, while proposals rose to 75,598 compared with 62,631 in 2021.