How are Businesses Faring in Canada?

How is the economy faring in Canada? The number of personal and business bankruptcies tells the story. Viewed through those lenses the picture in Canada in 2024 is not pretty. In fact, the rise in both bankruptcies and proposals year over year is alarming. What sectors were hit the hardest, and how does the current state of affairs impact the advice tax and financial advisors provide? First, let’s take a look at the numbers:

According to the Office of the Superintendent of Bankruptcy “The total number of insolvencies in July 2024 was 24.2% higher than the total number of insolvencies in July 2023. Consumer insolvencies increased by 23.9%. Business insolvencies for the 12‑month period ending July 31, 2024, increased by 54.7% compared with the 12‑month period ending July 31, 2023.”

For the purposes of this article, the focus will be on Canadian businesses. You may have had clients who were forced into bankruptcy or who may face that prospect in 2025. The first question which needs to be asked is, what sectors of Canada’s economy were hit hardest this year? According to the Office of the Superintendent of Bankruptcy the construction industry was among them, along with transportation and warehousing.

Certain sectors provide insight into the state of our economy. Listed here are some of them with the increase in insolvencies during the period we’ve been discussing.

• Transportation and Warehousing (80.5%)
• Retail Trade (34.3%)
• Manufacturing (54%)
• Accommodation and Food Services (42.6%)
• Arts, Entertainment and Recreation (87.55)
• Management of Companies and Enterprises (77.5%)
• Real Estate and Rental Leasing (42.7%)
• Mining, Oil and Gas (56.3%)
• Wholesale Trade (62.2%)

These numbers paint a stark picture. No significant sector of Canada’s economy is seeing a decline in the number of insolvencies.This news belies the narrative that Canada has emerged from the Covid years and is once again thriving economically. But as has been pointed out in this same space, our construction sector is showing a marked lack of productivity, and it is not alone among Canadian businesses. 

To give more context, July over July, 2023 to 2024, 4299 Canadian corporations declared bankruptcy. Quebec was the province which saw the largest number with more than 2,800. Ontario fared somewhat better but still lost nearly 1,200 corporations in that same time period.

All provinces saw an increase in corporate bankruptcies from July ‘23 to July ‘24. The percentages make things look even gloomier. Quebec’s increase was more than 64%, Ontario’s  was more than 95% and Manitoba’s was a staggering 433% increase year over year.

If we examine insolvencies, that is bankruptcies and proposals, among non incorporated businesses, the numbers reflect a similar trend. More than 6,300 Canadian businesses either went under or filed proposals between July of 2023 and July of 2024. That figure represents a year over year increase of more than 54%.

Once again, Quebec suffered the largest losses. More than 3,600 businesses in la Belle Province were insolvent for the period listed. Among Canadian provinces only Saskatchewan witnessed a decline in the number of business insolvencies for the same period. Insolvencies among individual businesses were up in every province.

With the Canadian dollar hovering just above 70 cents US and incoming American President Donald Trump promising high tariffs on Canadian goods it remains to be seen how our business sectors will fare in 2025. However, the Canadian Chamber of Commerce has already crunched the numbers and estimates that if the proposed tariffs are implemented that our GDP will shrink by 2.6%. That translates into about $78 billion. The Chamber’s Chief Economist, Stephen Tapp, believes that by mid 2025 this country could be in a full-blown recession. The Chamber’s full analysis can be found here.

As for the reasons behind the spike in insolvencies, high interest rates, inflation and declining consumer demand are factors. It’s also fair to acknowledge that some businesses may be taking on too much debt, or other factors such as a competitive market and ability to adapt to new technical innovation.  

Given the trend we are seeing among Canadian businesses and with the potential of job killing tariffs on the way, proactive financial planning with business clients should be explored before the new year.