Oil-producing provinces see highest spike in insolvency, government stats say
'We're just seeing the effects in terms of bankruptcy now' from dropping oil prices, says economics professor
Canada's oil-producing provinces are seeing the biggest spike in insolvency in the country, according to new statistics from the Government of Canada.
Alberta, Newfoundland and Labrador, and Saskatchewan had the highest percentage increases in the number of consumers and businesses unable to pay their debts in the 12-month period ending June 30, 2017, compared to the previous year, according to statistics from the latest report by the government's office of the superintendent of bankruptcy.
The office's insolvency statistics include both bankruptcies — consumers or businesses that have made a bankruptcy claim, or against whom a bankruptcy order has been made — and proposals, in which an offer has been made to creditors to settle debts.
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The biggest increase in insolvencies for the year ending in June was in Saskatchewan, where the total number of insolvencies rose 17 per cent over the year ending June 2016. Alberta had the second-highest jump — 11.6 per cent — followed by Newfoundland and Labrador with an 11.3 per cent bump.
There were 3,186 insolvencies in Saskatchewan (3,062 filed by consumers) for the year ending in June. In Alberta there were 13,361 (13,168 filed by consumers) and 2,436 (2401 from consumers) in N.L.
Ron Kneebone, an economics professor with the University of Calgary's school of public policy, said he is not surprised the three oil-producing provinces appear to be under the biggest financial stress.
He said the rise in insolvency was probably a delayed reaction to falling oil prices a year or two ago.
"We're just seeing the effects in terms of bankruptcy now, but we've seen the effects through loss of government revenue, loss of employment, loss of people's careers — they've all been happening for quite a long time," said Kneebone.
Consumer vs. business statistics
The three provinces also accounted for the highest jump in insolvencies filed by consumers, in the same order.
But there were significant differences in the business sector.
While the number of business insolvencies jumped by 48.5 per cent in Alberta and by 29.6 per cent in Newfoundland and Labrador, that number dropped by 9.5 per cent in Saskatchewan from 2016 to 2017.
There was one hopeful note in the latest statistics, though.
Overall, the jump in insolvencies in oil-producing provinces from the year ending June 2016 to the year ending June 2017 was lower than the jump from 2015 to 2016.
Between the 12-month period ending June 2015 and the same period ending June 2016, the total number of insolvencies increased by 28.9 per cent in Saskatchewan, 35.8 in Alberta and 31.4 in Newfoundland and Labrador.
Major spikes also occurred in Nunavut (66.7 per cent from 2015 to 2016) and the Yukon (37.8 per cent) from 2015 to 2016. Their bankruptcy rates dropped dramatically in the 12-month period ending June 30, 2017.
He added that the government should not try to rescue firms facing insolvency.
"This has come about because of a fall in oil prices and the governments in Canada cannot fix that, and so we just have to let the economy adjust to this low oil price regime," said Kneebone.