pytest coverage not working after python update to 3.11

Issue:
pytest stopped generating coverage

Description:
I upgraded python version from 3.6 to 3.11 (Ubuntu 18.04). I followed this https://www.debugpoint.com/install-python-3-11-ubuntu/ in order to do that.
Had issues with pip, followed this advice: https://stackoverflow.com/a/72685573/15923186

I have a project with following structure:

test.sh
|-sorting
  |- env (the virtual environment for sorting)
  |- requirements.txt
  |- pyproject.toml
  |- __init__.py
  |- merge_sort.py
  |- tests
     |-__init__.py
     |-test_merge_sort.py
  
|-something_else (etc.)

requirements.txt are following:

attrs==22.1.0
black==22.8.0
click==8.0.4
coverage==6.2
flake8==5.0.4
importlib-metadata==4.2.0
iniconfig==1.1.1
mccabe==0.7.0
mypy-extensions==0.4.3
packaging==21.3
pathspec==0.9.0
platformdirs==2.4.0
pluggy==1.0.0
py==1.11.0
pycodestyle==2.9.1
pyflakes==2.5.0
pyparsing==3.0.9
pytest==7.0.1
pytest-cov==4.0.0
pytest-cover==3.0.0
tomli==1.2.3
typing-extensions==4.1.1
zipp==3.6.0

Pyproject is following:

[tool.pytest.ini_options]
pythonpath = [
  "."
]

The test script is following:

#!/bin/bash

source "$1"/env/bin/activate

cd "$1" || { echo "Project not found!"; exit 1;}

pytest -vv --cov="$1" --cov-report xml --cov-report term

And is invoked like this:
./test.sh sorting

I’m not "reusing" old virtual environments, I double checked. Before running tests I prepared a new one like this (the same as previously when using python 3.6):

python3 -m venv env
source env/bin/activate
pip install -r requirements.txt

Python 3.11 is the default one for python3 command (output below):

> Python 3.11.0 (main, Oct 24 2022, 19:56:01) [GCC 7.5.0] on linux
> Type "help", "copyright", "credits" or "license" for more information.
> 

Result:
Nothing displayed, no coverage report generated

Expected result:
Coverage report generated and displayed in the terminal

I also tried to run with:

python3 -m pytest -vv --cov="$1" --cov-report xml --cov-report term

No difference.

If I remove

 --cov="$1" --cov-report xml --cov-report term

from the test.sh script I get following output (which is good and expected)

test session starts ================================================================
platform linux -- Python 3.11.0, pytest-7.0.1, pluggy-1.0.0 -- /path/to/the/env/which/is/irrelevant/sorting/env/bin/python3
cachedir: .pytest_cache
rootdir: /home/mysusrname/folder_name/subfolder_name/sorting, configfile: pyproject.toml
plugins: cov-4.0.0
collected 3 items                                                                                                                                  

tests/test_merge_sort.py::test_merge_sort[numbers0] PASSED                                                                                   [ 33%]
tests/test_merge_sort.py::test_merge_sort[numbers1] PASSED                                                                                   [ 66%]
tests/test_merge_sort.py::test_merge_sort[numbers2] PASSED                                                                                   [100%]

3 passed in 0.01s =================================================================