Navigating Insolvencies in 2024

About this virtual conference

On March 20, 2024, we hosted a virtual conference focused on navigating insolvencies in the coming year, presented to the Business Development Bank of Canada (BDC). In this insightful session, I had the privilege of interviewing Mr. Maxime Lemerle, the Lead Analyst for Insolvency Research at Allianz-Trade, as we explored the resilience of Canadian entrepreneurs in the aftermath of COVID-19.

Recap of Part 2

In the previous section of our virtual conference coverage, we examined the sector-specific insolvency impacts, revealing a broad-based increase across nearly all sectors. Accommodation, construction, and retail emerged as the hardest hit, each facing significant challenges in the current economic climate.

Continuing our in-depth discussion, we shift our focus to the future of insolvencies. With the revelation of widespread sectoral challenges, the question arises: what does the future hold for insolvencies in Canada?

Outlook for Insolvencies

During the conference, I, Roch, posed a question to Maxime Lemerle about the outlook from his expert perspective, seeking forecasts for the coming years and how these trends may evolve.

Maxime’s Insightful Forecast

Maxime provided a detailed forecast for Canadian bankruptcies in 2024-25. The latest figures indicated a strong acceleration in the last quarter of 2023, with a +42% quarter-over-quarter and a +57% year-over-year increase, totaling 1,203 cases—a number not seen since Q4 2009. Despite historical trends showing fewer bankruptcies in Q3, the last quarter of 2023 was an anomaly.

Looking ahead, Maxime’s baseline scenario for 2024 projected insolvencies to surpass a 15-year record high with 4,100+ cases, marking an 11% increase and significantly above the average from 2000-2023.
Contributing factors included sluggish GDP growth projections, continued tough financial conditions with high lending rates, and the struggling small and medium-sized enterprises, particularly those founded in the last decade with business models reliant on lower credit costs.
By 2025, the forecast anticipates a slight increase to 4,220 cases, with the peak occurring in Q1, aligning with an expected macro and financial improvement.

Summary

Maxime’s forecasts suggest that the insolvency landscape will continue to be challenging for Canadian businesses, especially in the construction and B2C sectors. As the economy grapples with weak demand and high operating costs, the resilience of small and medium-sized businesses will be tested.

What’s Next in Part 4

In the upcoming section, we will explore a critical question: do absolute figures obscure the nuances within insolvency data? Stay with us as we delve into this and other complexities in Part 4 of our series on Navigating Insolvency in 2024.

About this series

This insightful session is part of our ongoing commitment to providing valuable perspectives that can help entrepreneurs and business leaders strategize for the future. For those who missed the earlier sessions, we invite you to review the conference materials available on our website for a comprehensive understanding of this evolving landscape.

For further details

For those looking for further details or who have additional questions, Jocelyn St-Onge from Allianz-Trade Canada and I, Roch Simard, are readily available as resources to assist you.

We extend our gratitude to Maxime Lemerle for his expert analysis, to Véronik Ménard and her team at the BDC for facilitating this important discussion, and to all the participants who joined us for this conference. It’s through these collaborative efforts that we can equip ourselves with the knowledge and tools needed to thrive in the evolving business landscape of 2024 and beyond.