The article discusses the rise in bankruptcy filings in Canada, particularly in certain industries such as construction, accommodation and food services, transportation and warehousing. The Canadian Association of Insolvency and Restructuring Professionals reported a 37% increase in insolvency filings in the construction sector, a 32% increase in accommodation and food services, and a 28% increase in transportation and warehousing.
Several factors are contributing to this trend:
- High interest rates: The Bank of Canada’s decision to raise interest rates has made borrowing more expensive for individuals and businesses.
- Increasing construction costs: Higher labor and material costs have reduced the profitability of construction projects, leading to an increase in insolvency filings.
- Perfect storm in real estate: High interest rates and increasing construction costs have created a challenging environment for the real estate industry, with many developers facing financial difficulties.
- Multinational companies filing for bankruptcy in Canada: Companies based in the United States are taking advantage of the Canadian insolvency regime, which is considered more favorable than the US system.
The article also mentions that the oil patch has been affected by a downturn in natural gas prices, leading to an increase in bankruptcies and receiverships among oil and gas producers in Western Canada.
According to Geenen, a Toronto-based licensed insolvency trustee, the current trend of high bankruptcy filings is expected to continue into 2025. He notes that there are several factors contributing to this trend, including:
- Uncertainty in Ottawa: The recent election in Canada has created uncertainty and instability, which can drive up insolvency statistics.
- Tariffs and trade policies: The threat of tariffs following the US election has shaken business confidence and may continue to impact insolvency rates.
Overall, the article suggests that the current trend of high bankruptcy filings is a result of a combination of factors, including high interest rates, increasing construction costs, and uncertainty in Ottawa.