Business insolvencies will likely remain elevated throughout 2024, experts said, as the economy plays catch-up after historically low levels during the pandemic.
At some point in the latter half of 2023, business insolvencies started surpassing pre-pandemic, or 2019, levels. But that’s not necessarily a worrying thing, MacParland said. Government support and patient lenders kept business insolvency levels low for several years, longer than industry watchers had expected, said Dina Kovacevic, editor of trade publication Insolvency Insider.
Kovacevic added that numbers could start tapering in the later part of 2024 closer to pre-pandemic levels. Businesses were already grappling with inflation, labour shortages, higher interest rates and weaker consumer spending, said Simon Gaudreault, the CFIB’s chief economist and vice-president of research. That deadline was likely the “straw that broke the camel’s back,” he said.
Small businesses have less runway to restructure, said MacParland, and many don’t file at all, choosing to simply close their doors.The Davies report looked at Statistics Canada data estimating business closures, and found that the number of businesses closing per month was higher in the second half of 2023 than the first.
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