I-91 Corridor Businesses: Profits Up, Outlook Mixed
The percentage of profitable Hartford-New Haven-Springfield businesses reached a post-recession high this year, although concerns remain about the region’s growth prospects.
The 2017 Hartford-New Haven-Springfield Business Survey, released today at the State of the Union Conference in Springfield, shows 64% of companies reporting net profits, up two points from the last survey in 2015.
That’s the highest percentage since the recession hit in 2008, with 69% of surveyed businesses also expecting a profitable 2018.
Twenty-six percent of companies say they broke even, up four points from the last survey. Ten percent reported losses, down from 16% in 2015.
Looking ahead, 46% expect improved economic conditions for their firms in 2018, 40% have a stable outlook, and 14% are pessimistic.
That contrasts sharply with business leaders’ short-term outlook for the region, with 29% saying the region’s economy will improve next year, 38% forecasting stability, and a third expecting a downturn.
CBIA economist Pete Gioia said those findings largely reflect widespread uncertainty among Connecticut businesses, with the state’s post-recession economic recovery hampered by ongoing fiscal issues.
“Fiscal health counts in economic and job growth,” Gioia said. “Connecticut’s budget crisis certainly impacts the thinking of businesses when it comes to planning investments and expansion.”
Fiscal health counts. Connecticut's budget crisis certainly impacts the thinking of businesses.
Half the surveyed companies have locations in Connecticut, 44% are in Massachusetts, and 6% have operations in both states.
Of the Connecticut-based companies, 43% are in Hartford County and 39% in New Haven County. Sixty percent of the Massachusetts-based companies are in Hampden County, while 33% operate in Hampshire County.
Region's GDP Tops $161 Billion
The region's combined gross domestic product exceeded $161 billion in 2016.
At $90 billion, Greater Hartford has the largest economy of the region's three metro areas, experiencing no growth in 2016, a year after growing 4%.
The New Haven-Milford metro area's economy grew 1.8% to $44.1 billion in 2016 after expanding 1.1% the previous year.
Springfield's GDP grew 1.1% to $27.3 billion in 2016 after growing 2.4% in 2015.
Quality of life traditionally polls as the region's greatest asset and this year was no different, cited by 43% of businesses—up from 35% in 2015.
Proximity to customers, ranked first by 20% (down from 24% in 2015) and access to major markets (13%, down four percentage points) were also seen as primary benefits.
Barriers to Growth
The survey found significant challenges exist for businesses in the I-91 corridor.
High taxes were the main barrier to growth (28%), down slightly from the 2015 survey (31%).
Other challenges include a weak economy (24%), shortage of labor (21%), regulatory climate (9%), and infrastructure.
Almost one-third (31%) of businesses in the corridor plan on expanding their operations within the next one to two years, while another 16% are uncertain about their expansion plans.
More than half (54%) have no plans to expand operations during that time.
Just 10% cited the availability of a skilled workforce as a major regional benefit, down from 13%.
Finding, Retaining Talent
Finding and retaining qualified workers is an increasingly difficult challenge for regional businesses, an issue aggravated by an anticipated surge in retirements over the next three years.
While more than half (56%) of respondents do not expect any retirements this year, 78% will be addressing the challenge of replacing retiring workers by the end of 2019.
One-third (33%) expect to lose up to 5% of their workforce by the end of next year. Another 28% say between 6% and 20% of workers will retire over the same period, jumping to 39% by the end of 2019.
When it comes to finding talent, 34% of companies experience difficulties both finding and retaining young workers, 20% have trouble just finding them, while retention alone is an issue for 9%.
30% of our future workers are coming from urban cores and they must be included in workforce development efforts.
"Let's address next generation workforce issues head on," said Lyle Wray, executive director for the Capitol Region Council of Governments.
"Thirty percent of our future workforce is coming from urban cores and we must include those areas in workforce development efforts."
Congestion Main Transportation Issue
Transportation also remains a concern for regional businesses.
Two-thirds (66%) of the I-91 corridor's business leaders say traffic congestion and poor and deteriorating infrastructure are the most pressing transportation issues facing the region.
Twenty-one percent cited the lack of mass transit options. Both findings are unchanged from 2015.
The new 62-mile Hartford Line commuter rail between New Haven and Springfield will be used by 22% of businesses and their employees once it begins service next year. Over half (53%) will not use it and 25% were uncertain.
An overwhelming 90% of business leaders say expanding commuter rail service between Boston and Springfield will benefit their business, while 91% believe it will positively impact the region's economy.
"For the Knowledge Corridor to remain competitive, it must continually strive to expand its transportation connections and choices," said Tim Brennan, executive director of the Pioneer Valley Planning Commission.
Bradley Airport's Essential Role
Bradley International Airport in Windsor Locks, Connecticut, is an essential component of the region's transportation infrastructure.
Just over three-quarters (77%) of surveyed business use Bradley International Airport, ranked number five in the country this week in Condé Nast Traveler's annual Readers' Choice Awards.
That compares with the 40% who fly out of out of New York City airports and the 36% who use Boston Logan International Airport. Providence's T.F Green Airport draws 18% and other smaller regional airports attract 13%.
The survey found Bradley could drive greater business use with more direct flights to major domestic destinations, cheaper fares, and expanded international nonstop service, mainly to London and Paris.
Gioia said that while concerns remain over costs, workforce development, and infrastructure challenges, the region's numerous strengths demand greater focus.
"Leveraging the region's strengths requires concerted, coordinated efforts from the private sector to drive greater recognition among lawmakers about the challenges and secure their commitment to maximize economic vitality," he said.
EXPLORE BY CATEGORY
Stay Connected with CBIA News Digests
The latest news and information delivered directly to your inbox.