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For Immediate Release
September 9, 2004

 

CONNECTICUT EXECUTIVES SAY BUSINESS CONFIDENCE HIGHER THAN EVER BUT
 LONG-STANDING ISSUES REMAIN

Connecticut business executives say the state’s high quality of life and its location are key reasons for locating in Connecticut. In fact, business confidence in Connecticut is higher than ever, and executives are committed to expanding their companies in Connecticut, reversing a recent trend of declining confidence.

But, in light of increasing interstate and global competition, a slow state economic recovery, and the continued high cost of doing business here, many executives say state government needs to do more to help them grow in Connecticut.

Those are some of the key findings of the 2004 Survey of Connecticut Businesses, released today by the Connecticut Business & Industry Association (CBIA) and Blum Shapiro, the largest regional accounting firm in the state, based in West Hartford.

“While the survey holds some encouraging news, particularly in that more businesses would be willing to relocate or expand here, the results also contain some very troubling signs,” said Kenneth O. Decko, CBIA president and CEO. “State policy makers must address these issues if Connecticut is to be competitive over the long term.”

The report also shows that numerous long-standing problems related to doing business in Connecticut remain. Connecticut’s taxes continue to cause businesses concern, especially property taxes on real estate and equipment, unemployment compensation taxes, personal income tax, and the corporate income tax.

Among the respondents’ greatest challenges in operating a business in the state are the cost of doing business in Connecticut (29 percent), high health-care benefit costs (16 percent), taxes (14 percent), the availability of qualified workers (11 percent), and government regulations (8 percent).

Expansion and relocation
Despite the high cost of operating a business in Connecticut, 71 percent of executives said they were considering expanding or relocating their businesses within the state, an increase from 67 percent last year. But, more than half of manufacturers (54 percent) and nearly a quarter (22 percent) of all responding companies reported that they had been contacted by other states about relocating elsewhere.

Among the most important factors cited by executives as influencing their potential relocation and expansion decisions were the overall cost of doing business (65 percent), health-care benefit costs (60 percent), labor costs (47 percent), and tax credits and incentives (35 percent).

When asked what actions Connecticut could take to encourage businesses to stay or locate here, respondents said offering more tax credits and incentives (37 percent), lowering the overall cost of doing business (15 percent), encouraging more business investments in Connecticut businesses (12 percent), modifying laws and regulations (8 percent), and encouraging lower health-care benefit costs (7 percent).

Profitability and growth
Many state companies that are growing attribute their success to innovation. Nearly half (48 percent) of all survey respondents said they had introduced new products or services in the previous 12 months. Other business-improvement approaches implemented were expanded markets (17 percent), technological improvements (16 percent), new materials and equipment (14 percent), improved advertising efforts (12 percent), and cost-saving procedures (10 percent).

More than half (52 percent) of business respondents expect to continue investing in their businesses by developing new products and services within the next 12 months. Thirty-three percent of respondents identified investment in new technology as a future growth strategy that will boost their businesses. Last year, only 19 percent of surveyed executives cited new technology as a growth strategy.

“It is reassuring to see that executives’ confidence in Connecticut as a good place to expand or relocate their business continues to grow,” said Carl R. Johnson, Blum Shapiro managing partner. “And, as is the history of businesses in our state, development of new products and services leads the way in how executives plan to adapt and change the way they conduct business.”

Global concerns
International trade is playing an increasingly large role in the Connecticut economy. Twenty-five percent of survey respondents said their companies were involved in international trade, with nearly all of those (93 percent) currently achieving export sales. While most of those respondents (65 percent) attributed up to 10 percent of their company’s overall sales to exports, more than 70 percent of executives said that within the next five years, they expected that exports would grow to 25 percent of their overall sales.

When asked to consider their two greatest concerns about global competition, 59 percent of executives cited competitive costs (47 percent selected it as their top concern), and 42 percent cited the loss of U.S. jobs. Other top concerns included unfair trade practices (29 percent), the high U.S. dollar (19 percent), and U.S. security and defense issues (10 percent).

Firm and industry outlooks
Despite the slowly improving economy, Connecticut executives’ opinions are mixed about current conditions for both their individual firms and their industries, but they believe conditions for their firms will improve over the next 12 months.

Eight percent of respondents described current business conditions for their firm as excellent, but only 4 percent said the same for conditions in their industry. Thirty-one percent said conditions at their firms were good, 26 percent said average, 24 percent fair and 11 percent reported poor conditions for their firms. In comparison, 26 percent reported good, 26 percent average, 29 percent fair and 15 percent reported poor overall industry conditions.

Despite the uncertainty of world events and the economy, 9 percent of surveyed executives projected excellent future business conditions for their individual firms, 37 percent predicted good, 28 percent average, 20 percent fair and 7 percent poor. However, executives were more pessimistic regarding conditions for their industries, with only 5 percent predicting excellent conditions, 27 percent good, 30 percent average, 28 percent fair and 11 percent poor.

Workforce growth and productivity
More jobs could be created in Connecticut over the next 12 months, as a third of respondents (33 percent) said they expect to increase current workforce levels. Most (58 percent), however, predicted no change, and only 9 percent said they would cut jobs.

Despite the projections of job creation, 32 percent of respondents said they had full-time openings they were not filling. Among the reasons cited for not hiring full-time employees were lack of qualified workers (13 percent), a weak economy (13 percent) and the high cost of health-care benefits (11 percent). But despite those high benefit costs, nearly all (90 percent) of the respondents provide their employees with health-care benefits.

Many businesses are having difficulty finding qualified workers to fill high-skill jobs. Thirty-five percent of respondents said among the toughest jobs to fill are skilled machinists and other manufacturing jobs, and 15 percent said they are having difficulty filling engineering positions.

“The survey shows that most Connecticut businesses have done an outstanding job handling the recent economic challenges and positioning themselves for growth in the coming year. But, many businesses are still struggling to overcome these challenges, and state government needs to take actions to help create more momentum for continued business growth and expansion in Connecticut,” said Decko.

Methodology
The survey was sent to Connecticut companies in May and June 2004. A total of 572 surveys were returned, for a response rate of 7 percent and a margin of error of plus or minus 4 percent.

CBIA is the state’s largest business organization, with 10,000 member companies.

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

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