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CONNECTICUT SMALL AND MIDSIZE COMPANIES
SAY THE WORST IS OVER September 4, 2003 Executives of small and midsize Connecticut businesses say they have endured the worst of the post-9/11 economy, and many say they are seeing signs of recovery. They remain committed to the state, and praise the quality of life and the skills of the people here. Those are the key findings of the 2003 Survey of Connecticut Small and Midsize Businesses released today by the Connecticut Business & Industry Association and Blum Shapiro, the largest regional accounting firm in the state, based in West Hartford. But the report also shows that manufacturers are less optimistic than the group as a whole. The recession and overseas competition have left them weaker than other sectors. And while manufacturers think conditions will be improving here, they are also more open than other businesses to relocation overtures made by other states and countries. The report also points out an emerging issue---the “graying” of Connecticut’s workforce. And numerous long-standing problems of doing business in Connecticut remain, such as taxes, high workplace and energy costs, congested transportation and a low supply of available skilled workers. The report also shows a considerable level of concern among Connecticut executives over terrorism and conflict in the post-9/11 world. In fact, concerns about terrorism overshadowed their worries over the economy and overseas competition. Companies had postponed placing orders, delayed needed improvements in operations, put off hiring more workers, and halted plans to expand. Very few respondents said their businesses were unaffected by world events. ”The extent of this concern compared to other factors was a surprise in the report, but now there’s more optimism going forward,” according to Carl R. Johnson, managing partner of Blum Shapiro. While executives still see obstacles on the road to recovery, they are significantly more upbeat about the next 12 months. Forty-two percent predicted future conditions for their companies would be good or excellent, versus fair (24%) or poor (7%). Manufacturing conditions are anticipated to improve considerably, with 31% percent expecting excellent or good conditions in 12 months, and 35% anticipating fair conditions. Better news is that companies are positive about potential gross sales and revenues over the next 12 months, with nearly 40% expecting their sales and revenues to increase. But the high costs of doing business in Connecticut continue to trouble employers. Despite significant improvements over the past decade to bring Connecticut’s business costs in line with those of other states, executives continue to describe a high-cost environment that seriously limits their competitiveness. Kenneth O. Decko, CBIA president and CEO added, “ The additional business taxes adopted by state government this year are a serious step backward. Connecticut needs to return to an agenda that will strengthen business confidence and encourage job-creating investment in our state.” Reacting to an open-ended question, survey respondents said the cost of doing business (31%) was their biggest challenge in Connecticut. When asked to identify their most significant specific cost concerns, 81% chose high health-care costs, with 46% naming them the most troubling of 13 factors. Employers’ health-benefits costs are accelerating relentlessly. More than 80% of executives surveyed described a hike of 10% or more in their health-care costs last year, compared with 56% reporting such an increase in a 2001 survey. Nearly a quarter experienced increases of over 20% in the last 12 months — a threefold increase over 2001. This is alarming considering that overall inflation rates are under 3%. In addition, more than three-quarters of respondents (77%) were bracing for additional increases of 10% or more in the next year. Companies still predominately favor Connecticut as the place to grow or relocate their businesses. Two-thirds of executives who said they were considering expanding or relocating their business said they would do so in Connecticut. Yet this vote of confidence drops to about half of manufacturing executives surveyed, with many of them considering other states or overseas as options. Almost one in five respondents overall and nearly one-third of manufacturers have been targeted by other states to relocate or expand elsewhere and have been offered a variety of incentives. Out-of-state economic development officials or corporate relocation consultants had directly approached 33% of manufacturing respondents in the past 12 months, despite a slow economy. Looming on the horizon is another significant challenge — the graying of Connecticut’s workforce. According to the 2000 census, Connecticut was the seventh most aged state in the nation. Our workforce, with a state median age of 37.4 years, is aging. Nearly six out of every 10 executives expect 10% or more of their workforce to retire over the next 10 years; 21% will lose one in four workers to retirement over the same period. This will make replacement workers in high demand, first as our economy recovers, and then for several years to come as the workforce ages. The survey was conducted in late May and June of companies employing
500 or fewer employees. There were 781 surveys returned for a response
rate of 11.1 percent and a margin of error of plus or minus 3.6 percent.
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