For Immediate Release
Sept. 4, 2008

 

ECONOMIC PRESSURES INFLUENCING CONNECTICUT BUSINESSES

CBIA/Blum Shapiro Survey of Connecticut Businesses finds companies working harder to stay productive and competitive

 

The volatile national economy is beginning to influence business confidence and conditions in Connecticut, but employers are remaining generally optimistic and are adapting, coping and changing their strategies in order to grow and succeed here.

State businesses have been hit with a variety of business challenges, from rising costs — including energy and health care — future economic uncertainties, and price increases for commodities. In some case these challenges are more acute in Connecticut than in other parts of the country. But businesses are approaching these issues with greater creativity and resolve and are looking to state government to help remove barriers to growth and promote policies that are good for business and good for Connecticut.

Those are some of the key findings of the 2008 Survey of Connecticut Businesses, released today by the Connecticut Business & Industry Association (CBIA) and Blum Shapiro, the largest regional accounting firm in the state. The survey highlights the most pressing concerns facing Connecticut's business community and could help state policy-makers identify ways to improve the state's economic climate.

"The ability of Connecticut businesses to quickly react and adapt to changing market demands is the key reason our economy is slightly ahead of much of the country,” said John R. Rathgeber, CBIA president and CEO. “State government should take note and do all it can to help employers be more competitive to drive economic growth and job creation.”

Business/economic climate

Most Connecticut businesses responding to the survey performed well last year, and more than half (54 percent) expect their companies to grow over the next 12 months. But 32 percent expect no growth for their companies and 14 percent expect negative growth.

"To promote growth, businesses will need to focus on reducing energy costs, developing new products and utilizing the power of technology and the Internet,” said Brian A. Renstrom, partner, Blum Shapiro.

Challenges

The cost of doing business in Connecticut remains the single greatest challenge for the vast majority (70 percent) of survey respondents. Employers cited the following as their most problematic costs:

• Health care (53 percent)

• Energy (15 percent)

• Payroll (15 percent)

• Regulatory compliance (7 percent)

• Workers' compensation (7 percent)

In addition, taxes represent a significant burden for business owners. More than a quarter (26 percent) identified the personal income tax as their chief concern, which is significant because many Connecticut small businesses pay tax on their business income through the personal income tax. Other taxes cited as onerous are:

• Property taxes (37 percent)

• Corporate income tax (14 percent)

• Unemployment compensation taxes (12 percent)

"The results of the survey are telling,” said Jay M. Sattler, CPA, partner, Blum Shapiro. “From a tax perspective, I'm hopeful the legislature will take to heart the significance the role of taxation plays in the success of Connecticut businesses.”

Barriers to growth

Health care costs

Health care costs weigh heavily on Connecticut businesses, and employers are not optimistic about relief in the near future. Almost all, 94 percent of respondents, reported higher health care expenses last year, and almost 70 percent expect costs to increase more than 10 percent over the next year.

Business owners believe there are steps that can be taken to help make health care more affordable, including employee incentives for healthy living cited by 45 percent, health savings accounts (42 percent) and a reduction in the number of medical procedures and services with state-mandated coverage. There are 51 health care mandates in Connecticut, one of the highest totals in the U.S., and experts say these mandates contribute to higher health care costs overall.

But despite the high costs of health care, almost all (94 percent) of Connecticut businesses surveyed offer health care benefits to their employees.

Energy

The cost of energy is another concern for employers, with 79 percent of those surveyed saying higher prices are affecting their operations. More than half (52 percent) were forced to raise the price of their products and services in response. Twenty-seven percent said that energy costs have limited their ability to expand their businesses, and 23 percent said it affected their decision to hire additional workers.

Most (85 percent) are taking steps to reduce their energy consumption through sustainable business practices. That's up from 75 percent who reported reducing their energy use last year, 69 percent who did so in 2006 and 50 percent in 2005.

"The real problems are long-term labor and energy costs,” said Andres Carbacho-Burgos, economist, Moody's Economy.com. “Connecticut businesses need to both reduce their health care costs, and diversify their energy sources to achieve better competitiveness at home and abroad.”

Other top issues

Workforce

In addition to the financial challenges facing employers, 61 percent are coping with workforce shortages, a problem expected to intensify as baby boomers approach retirement age. Almost three-quarters (72 percent) of respondents report a lack of qualified job applications, with 34 percent seeing applicants who are simply not job-ready. Employers also cited the cost of living in Connecticut (59 percent) and high housing costs in particular (45 percent) as key obstacles to attracting workers, as well as the state's transportation issues (20 percent).

2008 election

Executives were asked which presidential candidate would help businesses more in the next four years. The majority, 61 percent, believe Republican Senator John McCain would do more for businesses, while 28 percent said Democratic Senator Barack Obama would do more for businesses.

"Despite the high costs of doing business in the state and sagging economic conditions, many Connecticut businesses are persevering by investing more in their operations,” said Peter M. Gioia, CBIA vice president and economist. “This is a clear sign that most Connecticut businesses are on solid footing and working to say competitive in the global economy — and positioned to propel the state into economic recovery. But they need state government to work in a cooperative effort for polices that are good for Connecticut.”

Methodology

The survey was sent to Connecticut companies in June 2008. A total of 752 surveys were returned, for a response rate of 13 percent and a margin of error of plus or minus 3.75 percent.

For a copy of the survey, visit cbia.com/newsroom/surveys.

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CBIA is the state's largest business organization, with 10,000 members.

 

Blum Shapiro is the largest regional accounting and business consulting firm based in Connecticut and one of the largest in New England.

For more information contact Nancy Andrews, CBIA media relations manager, at 860-244-1957 or andrewsn@cbia.com.

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