FOR IMMEDIATE RELEASE:
[La version française suit le texte anglais.]
ONTARIO INSOLVENCIES REACH LOWEST ANNUAL LEVEL SINCE 2000 DURING PANDEMIC
TORONTO, April 28, 2021 - Today, at the request of the Standing Committee on Finance and Economic Affairs (SCFEA), the Financial Accountability Office of Ontario (FAO) released its latest report which assesses the impact of the COVID-19 pandemic on insolvencies in Ontario.
Ontario insolvencies declined sharply by 24.0 per cent in 2020 to the lowest annual level since 2000. The decline in insolvencies is exceptional among recessionary periods and reflects several unique temporary factors related to the COVID-19 pandemic. Lower interest rates helped reduce debt payments faced by consumers, while many creditors offered payment deferrals on loans which helped lessen financial strain during the pandemic. Additionally, governments provided significant financial support to households and businesses that bolstered incomes.
Insolvencies declined in all major cities and most industries in Ontario in 2020. Across Canada, insolvencies declined in all provinces, with Ontario reporting the third smallest rate of decline behind Alberta and Manitoba.
Given the ongoing economic challenges related to the pandemic, insolvencies could increase in the medium term and will depend in part on the extent and pace at which government support is phased out. As well, interest rates are expected to rise gradually which will put upward pressure on debt obligations for many Ontario households.
To learn more, read the full report here.
- Prior to the pandemic, Ontario insolvencies hit a seven-year peak of 45,754 cases in 2019, reflecting the impact of rising interest rates on the financial position of households.
- Insolvencies in the January-February 2020 period were 16.8 per cent higher than the same period in 2019. As the pandemic progressed, insolvencies declined by record amounts and by May 2020 were 43.3 per cent lower than a year earlier.
- The three industries hardest hit by the pandemic –– transportation and warehousing, wholesale and retail trade, and accommodation and food services –– all reported fewer insolvencies in 2020.
- In the first quarter of 2021, 41.4 per cent of Ontario businesses indicated that they are unable to take on additional debt. Nearly one-third of businesses in the accommodation and food services industries indicated they could continue operating for less than 12 months before closing or filing for bankruptcy.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario. Visit our website at http://www.fao-on.org/en/ and follow us on Twitter at https://twitter.com/InfoFAO.