Tax hikes included in the state budget approved by lawmakers during the 2015 General Assembly are among the main challenges facing Connecticut's economy according to a new survey released today.
Produced by CBIA and the accounting, tax, and consulting firm BlumShapiro, the 2015 Survey of Connecticut Businesses identifies issues and trends within the state's economic, fiscal, and regulatory climates.
The state's economy was the single biggest challenge for 43% of respondents in 2015, a significant increase in concern from last year's survey (34%).
Tax burden (15%), healthcare costs (12%), national economic conditions (11%), and regulatory costs (8%) also were listed as major challenges.
"Though this report gets at some of the state's weaknesses: in addition to its many strengths: our purpose is to highlight for policymakers both the hopes and deep concerns businesspeople have about doing business here," said Joe Brennan, president & CEO of CBIA.
"The economy has gained some traction, but Connecticut still faces many challenges. For the state to reach its full economic potential, policymakers must make economic growth their top priority."
When asked how lawmakers could enhance business competitiveness, 53% said reducing taxes should be the top priority. Others cited reducing the size/spending of government (22%), and reducing regulations (21%) as ways to enhance business competitiveness.
The survey did reveal cautious optimism, with 32% of respondents saying their companies were growing, and 50% reporting they were "holding steady."
Fewer than two-thirds of all businesses surveyed (63%) recorded a net profit last year. Just under a quarter (22%) broke even, and 15% recorded a loss.
"The ability of Connecticut's businesses to rise above the state's public policy and economic shortcomings and continue to remain profitable lends optimism to this year's survey," said Joseph Kask, office managing partner of BlumShapiro's West Hartford office.
"With 63% of businesses reporting profitability and 82% either maintaining their current size or growing, this is good news for our state, while recognizing the increasing concerns of business owners over many of Connecticut's fiscal issues."
Given Connecticut's position as a high-cost state, innovation is critical to growth and profitability. Half of businesses surveyed this year added new products or services in the past year, and slightly more (52%) expect to in the coming year.
While this is an uptick from last year's 47%, it represents a decline from five years ago, when 59% of companies planned to introduce a new product or service.
The survey found that, through 2016, workforce demand will be concentrated on mid-level employees, with 38% of companies saying that was their biggest need, followed by entry-level employees (27%), line workers (26%), and managers (6%).
When asked how the state could address the shortage of skilled workers, common responses included greater investment in technical education, better infrastructure and housing, and tax incentives for employee training.
One in three businesses surveyed report being approached about moving or expanding their operations to another state. Of those, nearly one in four are planning on moving to that state, 29% are considering shifting significant production to another state within five years, and 31% are weighing expansion in another state within five years.
Primary reasons for moving or expanding operations outside of Connecticut are the state's high costs (including taxes) and its anticompetitive business environment. More than three-quarters of business leaders (77%) say Connecticut's business climate falls short of other states in the Northeast, and 91% say we are outmatched by the rest of the country.
"The overriding theme of this year's survey is the need for state lawmakers to further engage business leaders to create a more business-friendly climate in Connecticut," said Andrew Lattimer, partner with BlumShapiro.
"By enhancing the dialogue on taxes, competitiveness, and the overall business climate, all of Connecticut will benefit."
The survey, released today at The Connecticut Economy Conference in Hartford, was emailed to approximately 5,500 businesses in June and July, with a 10.6% response rate and a margin of error of +/- 4.1%.
CBIA is Connecticut's largest business organization, with 10,000 member companies. For more information, please contact Meaghan MacDonald (860.244.1951; email@example.com).
BlumShapiro is the largest regional business advisory firm based in New England, with offices in West Hartford and Shelton, CT; Boston, Newton, and Quincy, MA; and Providence, RI. For more information, visit blumshapiro.com.