Survey: Despite Major Challenges, Connecticut Businesses Cautiously Optimistic

Connecticut businesses are cautiously optimistic about their COVID-19 recovery and growth prospects, according to a new survey released today.

CBIA’s 2020 Fourth Quarter Economic and Credit Availability Survey found that while a quarter of surveyed businesses suffered losses last year, more companies turned a profit than anticipated. 

Slightly less than half (49%) now believe Connecticut’s business climate is declining—a drop from previous surveys.

Of those who see a decline, 58% cite government policies, state spending, and regulations as the cause.

Six percent believe the state’s business climate is improving and 45% see it as static.

“Our state’s economic recovery is still fragile, and we cannot ignore the challenges that businesses continue to face,” said CBIA president and CEO Chris DiPentima.

“Businesses have pivoted to create critical PPE, continue to invest in their workforce, and prioritize giving back to their communities. 

“We need policies that support their recovery and growth, not ones that add burdens and costs onto businesses that have struggled the most.”

Profitability, Operations 

Only 26% of respondents reported current growth in sales (versus 39% in 2019), while 40% are holding steady and 34% are contracting.

Regarding COVID’s impact on business operations, 73% of businesses report they are operating under normal hours and capacity, while 24% were still operating with reduced hours and/or capacity, and 3% had increased their hours and/or capacity.

Almost a quarter (24%) of employers anticipate increasing the size of their workforce over the next six months, while only 11% predict reductions.

For the employers reporting reduced operations, 35% said they utilized layoffs, 33% reduced hours without using the state’s Shared Work program, 12% used the Shared Work program, and 8% reduced reliance on temporary and/or contract workers.

Supply chain issues persist, however, with 40% of businesses reporting continued disruption due to COVID-19 restrictions.

Almost a third (29%) of respondents said their supply chains were disrupted but were returning to normal, 21% reported no disruptions, and 10% said it did not apply. 

Pending Legislation

Several pending policy matters have Connecticut business leaders concerned as they look toward the future. 

Healthcare costs are a significant source of concern for employers. 

Ninety-eight percent of respondents report being somewhat (23%) or very concerned (75%) about employee healthcare costs, with almost identical levels of concern with the financial impact on their businesses. 

More than two-thirds (69%) oppose a public option healthcare plan, with 57% concerned that taxpayers will subsidize plan deficits and almost 50% say they don’t trust the state to manage health insurance plans.

Connecticut’s Unemployment Trust Fund became insolvent during 2020, forcing hundreds of millions of dollars in borrowing from the federal government. 

When asked about the impact increased unemployment taxes will have on their companies, 43% of respondents predicted it would be moderate, 34% thought it would be significant, 16% felt it would be minimal, and 6% were unsure.

More than two-thirds (67%) support reforms to Connecticut’s unemployment compensation system, including higher earning thresholds and requiring the exhaustion of severance pay before collecting unemployment.

Infrastructure

Employers were asked to indicate their level of support for various revenue sources for funding transportation infrastructure investments. 

Least popular among the proposals were increased taxes and fees, including gas tax (75% unsupportive), license or permit fees (69%), and sales taxes (68%).

The most acceptable were prioritizing projects for cost efficiency (87% supportive) and implementing reforms to encourage public-private partnerships (71% supportive).

Concepts including tolling, accounting changes and revenue diversions, scaling back rebates on electric vehicle purchases, and increased bonding produced mixed levels of support.

Credit Availability

Access to credit and adequate financing opportunities—excluding state and federal COVID relief programs—appears reasonably healthy, with 53% of respondents reporting they were able to meet their needs in 2020. 

A quarter (25%) of businesses reported not needing access to credit at all, 13% reported partial satisfaction, and 9% said they were unable to satisfy their financing needs. 

When asked to evaluate the current lending climate in Connecticut and share their credit outlook for the next six months, more than half (54%) called it satisfactory.

Eighty six percent of employers reported applying for the first round of the federal Paycheck Protection Program, while 40% said they applied for the second round.

Over half (57%) of firms reported having recently delayed capital and other investment decisions.

For the 60% of companies still looking for financing, more than half (58%) report needing it most for working capital (day-to-day operations, inventory, bridge loans), while 22% need it for capital investments in machinery and equipment, and 10% for plant or office space expansion. 

Of the 231 companies that responded to the survey, 88% have less than 100 employees. Forty-four percent are manufacturers, 12% are in business and professional services, 9% are in construction, and 7% in retail trade. 

CBIA’s 2020 Fourth Quarter Economic and Credit Availability Survey was emailed to 3,213 businesses in January, with a 7.2% response rate and a +/-6% margin of error.

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CBIA is Connecticut’s largest business organization, with thousands of member companies, small and large, representing a diverse range of industries from every part of the state. For more information, please contact Joe Budd (860.244.1951).