High costs, the lack of legislative predictability, and a growing demand for skilled workers are among the main factors hampering business growth in Connecticut according to a new survey.
The 2017 Survey of Connecticut Businesses, produced by CBIA and the accounting, tax, and consulting firm BlumShapiro, found that 49% of businesses are holding steady—compared with 51% in 2016—while 36% are growing (unchanged from last year), and 16% are contracting, up from 13% last year.
The survey, which examines the near-term outlook, export activities, workforce trends, technology investments, and legislative priorities of the state's business community, was released today at the Connecticut Economy conference in Hartford.
The state's high cost of living was the top factor impacting business growth, cited by 78%, followed by the uncertainty and unpredictability of legislative decision-making (72%), high business taxes (69%), government mandates (68%), and inadequate skilled job applicants (55%).
Sixty-five percent expect profits this year (compared with 66% last year), 24% say they will break even (17%), and 11% forecast losses (17%).
"We continue to see positive signs for Connecticut's business community—profitability is still up from five years ago and losses are at a 10-year low—despite the turmoil and lack of a state budget," said Joseph A. Kask, CEO of BlumShapiro.
When it comes to growth, increased customer sales (58%), tax incentives and lower business costs (27%), and investments in workforce talent (15%) are the biggest profit-driving factors.
On the other hand, factors driving losses include: high costs of taxes, regulations, and mandates (80%), decreased sales and loss of customers (13%), and retiring workers and difficulty finding qualified workers (7%).
Recruiting and retaining workers continues to be a discouraging trend. With the majority of businesses (61%) anticipating up to 15% of their workforce retiring in the next two to five years, the time to recruit new workers is now.
A variety of strategies are being used in preparation including leadership succession plans (53%), increased recruitment efforts (53%), job training programs (42%), and older worker retention options (23%).
A wide majority (83%) of businesses surveyed report employing people under 35 years old. However, 43% report problems recruiting and retaining young workers while 29% say they have no difficulty.
Businesses were also asked about legislative priorities, including their support for additional state employee retirement system reforms that go beyond the union concessions deal narrowly approved by the legislature in July.
Those responses included:
- 91% support eliminating the use of overtime in pension calculations (6% are neutral, 3% not supportive)
- 88% support delaying medical coverage until early retirees reach a certain age and ending early retirement plans (8% neutral, 4% not supportive)
- 88% also support implementing a defined contribution plan for all new state employees (8% neutral, 4% not supportive)
- 83% of respondents support increasing the retirement age (12% neutral, 6% not supportive)
The survey also found that a majority of respondents (81%) do not support increasing the state’s minimum wage to $15 an hour. When asked about paid family medical leave, 75% believe a state mandated program would negatively impact their business.
"The results of this survey are strongly aligned with CBIA’s call to action at the State Capitol: build the confidence, momentum, and investment needed to expand the economy," said Brian Flaherty, CBIA's Senior Vice President of Public Policy.
"As Connecticut continues to grow, this survey should be on the desk of every state legislator, as their actions on the state budget will either bolster or erode the ability to create and keep Connecticut jobs."
On the federal level, 80% of those surveyed said their business would be impacted positively if the federal government implemented a 15% corporate tax rate or lowered personal income tax rates. Just 16% were neutral, while 5% disagreed.
The 2017 Survey of Connecticut Businesses was mailed and emailed in June to approximately 6,400 top executives throughout Connecticut; 440 participated in the survey, for a response rate of 6.8% and a margin of error of +/–4.8.
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 Meaghan MacDonald (860.244.1957).
BlumShapiro is the largest regional business advisory firm based in New England, with offices in Connecticut, Massachusetts and Rhode Island. The firm, with over 450 professionals and staff, offers a diversity of services which includes auditing, accounting, tax and business advisory services. In addition, BlumShapiro provides a variety of specialized consulting services such as succession and estate planning, business technology services, employee benefit plan audits and litigation support and valuation. The firm serves a wide range of privately held companies, government and non-profit organizations and provides non-audit services for publicly traded companies. For more information, contact Tom DeVitto (860.561.6851).