"Not on my watch." That's how Bead Industries CEO Jill Mayer recalls her attitude as she and her leadership team mapped out the company's strategy in the early weeks of the COVID-19 pandemic.

"We’re a 106-year-old company," she told fellow business leaders Sept. 24 at CBIA's annual The Connecticut Economy conference. "We’ve been through recessions, depressions, World War I and II. It would have been real unfortunate to have gone through all of that just to crumble during a pandemic."

Conference panelists (clockwise, from top left): Frank Ferrucci from F+F Mechanical, Marcum's Ethan Brysgel, Five Eight Holdings' Richard Brown, Marcum's Michael Brooder, and Bead Industries' Jill Mayer.

Mayer's comments echoed the responses of her fellow business leaders in the 2020 Survey of Connecticut Businesses, released at the conference by CBIA and the public accounting and business advisory firm Marcum LLP.

The survey—which drew a record response this year—illustrates how employers are navigating an extraordinarily challenging and unprecedented period.

It also reveals the full economic cost of the pandemic, with revenue and profitability at historic lows, an uncertain employment outlook, and concerns about the state’s recovery.

Like 86% of survey respondents, Milford-based Bead applied for a federal Paycheck Protection Program loan, which allowed the company to avoid layoffs.

"Because of the funding, we didn’t have to have layoffs," she said. "We weren’t aggressively hiring, but we didn’t lay anybody off.”

Navigating COVID-19

More than half of survey respondents either cut hours, laid off employees, or imposed furloughs because of the impact of pandemic-related shutdowns and restrictions.

While 86% of surveyed firms were designated essential businesses and allowed to remain in operation when the Lamont administration declared a public health emergency in March—reflecting the broad list of industries across the state that continued to operate.

However, those sectors that were either closed through the June phase two reopening, remain closed, or operate with significant restrictions, are struggling to survive, with implications for the state’s economy as a whole.

Josh Geballe, the state's chief operating officer and commissioner of the Department of Administrative Services, also spoke at the conference, noting that while 95% of businesses are now operating, just 85% of the workforce is employed.

"All these challenges get a lot easier if we're driving growth and job creation."

State of Connecticut COO Josh Geballe

(Through August, Connecticut has recovered 54% of the 291,300 jobs lost in March and April.)

"These are very difficult, sometimes dire situations," Geballe said. "We kept many businesses open, including manufacturing, with the belief that they could operate safely.

"In retrospect, that worked and enabled us to limit the damage to our economy. We know we're not out of the woods, we know we've got to keep our guard up.

"We still have a long way to go and a lot of challenges ahead to rebuild our economy. We remain optimistic about the recovery. All these challenges get a lot easier if we're driving growth and job creation."

'Businesses Stepped Up'

CBIA president and CEO Chris DiPentima noted that while Connecticut is recovering better than most states, "there’s a lot at risk with our economy."

"Businesses stepped up, showing their resiliency and ingenuity in navigating COVID-19, protecting employees, and partnering with their communities," he said. "And businesses will lead our recovery."

The economic upheaval caused by pandemic-related government shutdowns and restrictions is far greater than the damage caused by the 2008-2010 recession.

2020 Survey of Connecticut Businesses
Source: CBIA/Marcum 2020 Survey of Connecticut Businesses.

Sixty-nine percent of surveyed firms said COVID-19's main impact was the decline in sales and revenues, 13% said reduced operations and job losses, and 12% noted the implementation of workplace safeguards to protect employees.

Only 47% of surveyed firms said they were profitable through the first two quarters of 2020, with 32% posting losses, and 21% breaking even.

Looking ahead, 47% project a profitable year, 28% expect losses, and 25% say they will break even. Seventy-seven percent of companies  posted profits last year, 13% broke even, and 11% operated at a loss.

Resiliency

Mayer's fellow conference panelist Richard Brown, managing partner at real estate investment company Five Eight Holdings, said the pandemic has shown the resiliency of the state's employers.

"Seeing how companies are being resilient and trying to be creative to figure out ways to continue to drive their business in a challenging environment, that was a good thing," he said.

"I was pleasantly surprised. Although there are some challenges, people have figured out a way to start to turn the corner.”

More than half of responding firms (54%) said their employees can work remotely. An average 40% of employees at those firms worked remotely at least through the second phase of the state’s reopening in June.

2020 Survey of Connecticut Businesses
Source: CBIA/Marcum 2020 Survey of Connecticut Businesses.

And 72% of employees at those companies continued to work remotely through July—the significant increase reflecting the return to employment of those who were earlier laid off or furloughed. Over one-third (37%) will continue to work remotely for the foreseeable future.

"We were able to get most of our employees to work remotely," said Frank Ferrucci, a vice president with North Haven-based F+F Mechanical.

"We need to think, 'how can we make our workforce as efficient as possible should we be quarantined again or simply just being flexible for our workforce?'

"We have a number of employees with young children who are doing school from home a number of days a week, so it’s allowing us to be more flexible with our workforce than we had in the past.”

Roadmap

Panel moderator Michael Brooder, managing partner for Marcum's Hartford office, said while the survey results show historic lows for sales and profitability, the responses also provide "a roadmap to help Connecticut rebuild, rebuild fast, and rebuild better.”

“Other businesses outside our state are giving Connecticut a second look, people are moving here in droves based on what we’re seeing in the real estate market the last few months, and businesses are still being innovative," he said.

"You’re adding new products. You’re doing research and development. Sixty-four percent of you plan on bringing new products to market and producing them here in Connecticut. Last year that number was only 48%.

"The survey responses provide a roadmap to help Connecticut rebuild, rebuild fast, and rebuild better."

Marcum's Michael Brooder

"So we’re seeing an uptick on what people are planning on doing, and hopefully seeing more business and less regulations in the state of Connecticut.”

Ethan Brysgel, Marcum's national financial advisory services leader, told the conference the record response to this survey shows "businesses are hungry for information as they look to make key decisions."

"Another thing that jumped out is that while there was a big downturn in the March-April time period, we’ve seen a quick rebound," he said. "I’m pleasantly surprised by that."

Long Haul

Brown said that Five Eight Holdings has benefited from the strong real estate market.

"We’re excited about what’s going on at least real estate right now," he said. "I am a little concerned about it being overheated.

"We’re not sure what’s going to happen in December when, maybe, COVID will increase along with the flu and the common cold, and what impact that will have on folks and how people feel."

2020 Survey of Connecticut Businesses
Source: CBIA/Marcum 2020 Survey of Connecticut Businesses.

Ferrucci said some of the company's scheduled business was put off indefinitely because of the pandemic.

“Certain organizations and facilities essentially stopped all work," he said. "As a matter of fact, all contracts we had in hospitals pre-COVID are still on hold.

"We are starting to see a slight rebound on the commercial contracting side but I think it’s going to be a pretty long haul in terms of it bouncing back to pre-COVID levels.”

Diversification

Mayer said manufacturers should “look into diversifying however they can at this point.”

“It really depends with manufacturing what markets you’re in," she noted. "We’re in enough different markets that we can handle it if our automotive is down but our medical and our specialty lighting are up.

"It really comes down to how diversified your customer base is.”

Given the challenges many Connecticut employers face with finding skilled employees, worker training remains the leading investment priority, cited by 29% of survey respondents.

Another 11% said they were making their greatest investment in recruiting qualified workers, while property and facilities (19%), new technology (17%), other capital assets (9%), and research and development (5%) were among the other responses.

2020 Survey of Connecticut Businesses
Source: CBIA/Marcum 2020 Survey of Connecticut Businesses.

Only 20% of businesses expect to increase their workforce over the next six months, slightly down from 2019, and well below the 39% that said they planned to add jobs in 2018. Another 20% expect employment at their firms to decline and 59% say job levels will remain stable.

"The pandemic hasn’t changed much in terms of our workforce needs," Mayer said. "There was probably a temporary widening of the talent pool due to layoffs but you had to be in the market for employees.

"Pandemic or not, there continues to be an issue with finding skilled workers. The biggest question is where are we going to find them?

"The long-term solution is attracting new people into the industry and investing in training them."

Rebuilding Connecticut

Thirty-six percent of surveyed companies say proximity to customers is the greatest advantage to running a business in Connecticut (up from 33% last year), 28% cite quality of life (29%), 12% the skilled workforce (6%), and 7% note the access to major markets (9%).

For 24% of the companies we surveyed this year, the ever increasing cost of complying with state regulations and mandates is again the main factor hampering business growth (excluding the coronavirus pandemic), closely followed by the difficulty of finding skilled labor, cited by 18%.

Small businesses, those with fewer than 100 employees, were more likely to view the state’s business climate negatively—perhaps a reflection of 2019 legislative actions, including the paid family and medical leave mandate, expanding the sales tax to PPE and safety apparel, and reducing the pass-through entity tax credit. The latter costs small businesses $53 million annually.

DiPentima told conference attendees that Connecticut has “an enormous opportunity ahead of us to rebuild our state, better and stronger than before."

2020 Survey of Connecticut Businesses
Source: CBIA/Marcum 2020 Survey of Connecticut Businesses.

He added that it was clear from survey responses that the factors that hampered Connecticut’s recovery from the last recession remain and cannot be ignored as the state begins rebuilding.

For instance, 42% of surveyed firms called for prioritizing state spending controls (including pension reforms), 14% identified policies that promote job and economic growth, 13% supported lower taxes or tax reforms, and 10% cited pandemic-related recovery programs.

"We face unprecedented challenges in the coming months, but they are challenges that we can overcome by dramatically reshaping the relationship between the public and private sectors,” DiPentima said.

"That's why we launched the Rebuilding Connecticut campaign. We’re asking elected officials, candidates for office, business leaders, and residents alike to sign the Rebuilding Connecticut pledge, and help drive the state’s recovery."