The Hamilton Spectator

Insolvenci­es to remain heightened in 2024, experts say

- ROSA SABA

Business insolvenci­es will likely remain elevated throughout 2024, experts said, as the economy plays catch-up after historical­ly low levels during the pandemic.

“We did have ... so many years of artificial­ly low filings. We’ve got a fair bit of catch-up to do,” said Natasha MacParland, a partner at Davies Ward Phillips & Vineberg LLP.

The pandemic saw a historical­ly low level of insolvency filings — which include bankruptcy and restructur­ing procedures — as government supports kicked in but in 2023 things started to normalize, said MacParland. That trend is continuing into 2024.

Business insolvenci­es in 2023 were up 41.4 per cent compared with 2022, according to data from the Office of the Superinten­dent of Bankruptcy. Compared with 2019, they were up almost 31 per cent.

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.

“I would have been concerned if all of a sudden there was a deluge of filings. But this seems to me to be what I would have expected,” she said.

She also noted 2019 was a milder year for insolvency filings, and that a certain level of insolvenci­es is healthy for the economy.

Insolvency, which a business often faces when it’s unable to pay its debt and other expenses, includes both bankruptci­es and proposals. Bankruptci­es mean the business is closing down, while a proposal offers a way to restructur­e.

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.

“In 2023, we saw insolvency levels starting to pick up as companies weren’t able to repay their COVID loans. Lenders started getting a little more impatient,” Kovacevic said.

She agrees the elevated numbers are a sign of normalizat­ion.

“I don’t think there’s any cause for concern at this point. I think the numbers that we’re seeing still are not higher than what we’ve been expecting. If anything, they’re still lower,” she said.

In 2024, both MacParland and Kovacevic expect the normalizat­ion to continue, with insolvency levels likely remaining heightened compared with pre-pandemic — though of course things could change depending on how the economy fares overall. Kovacevic added that numbers could start tapering in the later part of 2024 closer to pre-pandemic levels.

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