Highlights as of April 2022:
- Data from Equifax demonstrates that as of the end of 2021, businesses had largely avoided extreme financial distress thanks to government support programs. Since the start of the pandemic, firms across the Innovation Corridor have seen declining instances of negative occurrences such as returned cheques, legal suits, collections, judgements, or deferred trades.
- However, while insolvency numbers for businesses in the Innovation Corridor were declining all the way up to Q4 of 2021, they have since spiked in Q1 of 2022. Bankruptcies and proposals have risen by 14% in the region, mostly driven by increasing bankruptcies in the Toronto CMA.[1]
- The growing debt burden on struggling businesses could lead to further bankruptcies and other challenges to the regional economy. Equifax data also shows that the average balance of outstanding loans 90+ days past due continues to rise across the region, particularly in the Toronto CMA where the average balance has grown 60% between February 2020 and April 2022.
- The rise of corporate debt, particularly for small and medium-sized businesses, and its implications for the broader economy continues to be an area of concern. The Financial Stability Board (an international body that monitors the global financial system and promotes financial stability) has identified debt-overhang of non-financial companies as a potential drag on recovery as businesses under invest due to excessive indebtedness, resources are misallocated to unviable companies, and loss of entrepreneurial capacity leads to lower productivity. The design and implementation of business supports and/or debt relief will be critical to helping productive firms survive and thrive at the other end of the pandemic.
[1] Source: Office of the Superintendent of Bankruptcy Canada
Exhibits and Charts
As of Q4 2021, businesses had largely avoided extreme financial distress thanks to government support programs, with declining instances of negative occurrences such as returned cheques, legal suits, collections, judgements, or deferred trades.
The average balance of outstanding loans 90+ days past due continues to rise across the region, particularly in the Toronto CMA where the average balance has grown 60% between February 2020 and April 2022.