Ontario insolvencies declined sharply in 2020
- April 28, 2021
Despite the economic damage caused by the COVID-19 pandemic, insolvencies in Ontario declined by 24 per cent in 2020 to the lowest annual level since 2000, according to Ontario’s Financial Accountability Office (FAO).
The report says this significant drop in insolvencies is exceptional in a recessionary period and was likely the result of what the FAO calls “a number of unique temporary factors related to the pandemic.” These factors include lower interest rates that helped reduce debt payment obligations and federal and provincial government measures which helped the financial position of businesses during the pandemic.
Insolvencies declined in most industries in 2020, led by construction (-76 cases), professional, scientific and technical services (-24), and manufacturing (-24). The three industries hardest hit by the pandemic –– transportation and warehousing (-14), wholesale and retail trade (-10), and accommodation and food services (-7) –– all reported fewer insolvencies in 2020.
Insolvencies were up in three industries: educational services; information, culture and recreation; and real estate.
Total insolvencies fell in all Canadian provinces in 2020, with the Atlantic provinces generally registering the largest declines. Ontario reported the third-smallest rate of decline of total insolvencies in 2020 behind Alberta and Manitoba, according to the report.
We are not out of the woods yet, warns the FAO, which says insolvencies could increase over the medium term, depending on how quickly income support is phased out, as well as the impact of gradually rising interest rates.