Business insolvencies rose by 35.9% year over year, and consumer insolvencies were up 19.6%, the OSB reported.
The dual demons of high inflation and rising interest rates are being blamed for the recent upward trend in insolvency activity.
“We expect to see additional pressure on debtors and a subsequent increase in the number of business insolvencies, as higher borrowing and input costs impact businesses still struggling to recover from the pandemic,” said Jean-Daniel Breton, chair of the Canadian Association of Insolvency. and Restructuring Professionals (CAIRP), in a release.
“Post-pandemic, creditors are re-evaluating their approach to issuing credit as well as debt recovery. As a result, we are likely to see upward growth in insolvencies,” he added.
In June, bankruptcies were up 2.9% from the previous month, and proposals increased 7.7%.
And, for the second quarter, the number of insolvencies was up 8.9% from the first quarter, and up 11.0% compared to the same quarter last year, the OSB said.
While bankruptcies in Q2 rose by 8.2% from the first quarter, they were down 8.6% from the second quarter of 2021.
On the other hand, restructuring proposals were up 9.1% quarter over quarter, and increased by 20.7% compared to the same quarter a year ago.
Insolvency filings for the past year are also up. For the year ending June 30, the total number of insolvencies was up 1.5%, compared with the year ending June 30, 2021, OSB said.
Consumer insolvencies rose by 1.1% over that period, whereas business insolvencies increased by 14.6% year over year.
The OSB noted that the construction, and transportation/warehousing sectors saw the largest increase in insolvency activity, whereas the mining, energy, and finance sectors saw the largest decline in insolvencies.
“Looking ahead, businesses in industries most affected by fluctuations in cost and supply chain pressures and changes in business and consumer confidence are the most vulnerable,” Breton said.
Alongside the shifting financial conditions, the recent increase in insolvency activity also reflects the fact that filings are rebounding from very low levels.
On the consumer side, insolvency filings remain well below pre-pandemic levels. CAIRP noted that consumer filings are still 27.9% lower than their level in 2019.
Before the pandemic hit, consumer insolvencies were rising, the CAIRP reported — then, thanks to government supports, filings dropped by about 40% during the pandemic.
“The volume of insolvencies is now normalizing as consumers come to terms with the financial impact of Covid-19 and the higher interest rate environment,” it said.