The Northwest Connecticut Chamber of Commerce and the Connecticut Business & Industry Association are pleased to collaborate on the fourth biennial survey of businesses in northwestern Connecticut.

2014nwctNearly 200 companies representing a variety of sectors reported on their near-term outlook, the benefits and drawbacks of being located in northwestern Connecticut, workforce development priorities, and recommendations for growing the region’s and state’s economies.

Top Priorities

In a ranking of economic priorities for northwestern Connecticut, maintaining the area’s manufacturing base took top place, followed by regional collaboration among economic development groups, banks, accounting firms, utilities, and chambers of commerce as a way to attract businesses and retain a skilled workforce.

(Historically, supporting and growing the local manufacturing base is the region’s number-one priority, even among non-manufacturers.)

2014nwct1To spur economic growth in northwestern Connecticut, businesses recommend reducing personal and business taxes and providing incentives for job creation.

These are also two of the top three recommendations for growing Connecticut’s economy, the third being a shift in our approach to the delivery of public services in a way that increases quality and reduces government spending.

Economic Outlook

Fifty-nine percent of businesses surveyed anticipate an increase in their total sales revenue in 2015, and 46% expect more in pre-tax profits next year; however, most do not expect to grow their workforce over that same period.
While 36% say they will have more employees next year, nine percent anticipate having fewer employees, and the majority (55%) expect no change in the size of their workforce.

Advantages, Challenges

When asked 2014nwct4about the single greatest advantage to operating a business in northwestern Connecticut, businesses were fairly evenly divided, identifying:

  • Location near New York, Boston, and Springfield markets (22%)
  • Local environment (17%)
  • Supportive chamber of commerce (14%)
  • Active local banks (11%)
  • Arts, culture, and entertainment opportunities (10%)

There was much more consensus on the region’s single biggest disadvantage:

  • Cost of living (43%)
  • Inability to retain a young workforce (16%)
  • Lack of a coordinated regional approach to marketing (14%)
  • Aging workforce (12%)

Several factors of great concern for businesses in 2012 (when we last conducted this survey) no longer hold the same significance. These include credit availability, healthcare costs, and tight marketing budgets.

The business taxes and fees of greatest concern for northwest Connecticut businesses are, in order:

  • Local property taxes
  • Overall business fees/penalties
  • Personal income tax
  • Corporate tax
  • Sales tax

2014nwct2Marketing Trends

In 2008, only 29% of northwestern Connecticut businesses surveyed considered the Internet a viable tool for growing their business. In 2010, respondents were split on the advantages of Facebook, Twitter, LinkedIn, and other social networking technologies for their businesses: 36% saw potential benefits, 31% claimed no benefits, and 32% were undecided.

How times have changed.

While quality broadband is an issue for one-third of businesses surveyed, 56% use social media to market their products and services (and 60% do other web marketing)—edging out print advertisements (54% of businesses).

Radio, billboards, sales representatives, and word of mouth are other key components of the marketing mix.

A vibrant arts and culture scene brings in tourist dollars and has a tangible impact on a community’s economic success.

Seventeen percent of northwest Connecticut businesses surveyed identified themselves as arts- or culture-related, and resources used to market their businesses include the Northwest Connecticut Chamber of Commerce (63%), local chambers of commerce (38%), the Northwest Connecticut Arts Council (33%), CBIA (21%), and the Western Connecticut Convention and Visitors’ Bureau (also 21%).

Thirty-five percent of arts- or culture-related businesses say they get some state or federal funding.

Workforce

In no other area did we see as great a change from our last survey than in workforce issues.

In 2012, only 38% of employers in northwestern Connecticut planned to hire over the coming 12 months. This year, 58% of businesses in the region said they hired workers over the last 12 months, and 50% plan to over the next year. (It is likely that many of these hires are replacement workers, as most businesses do not anticipate growing their workforce in 2015.)

2014nwct5Employers in the region are deeply concerned about finding and keeping good workers. Two-thirds of those surveyed (67%) say the state’s aging workforce is a concern for their firm, up 11 percentage points from our last survey (56%).

While 35% of respondents characterize the quality of the region’s workforce as good or excellent, 30% believe it’s fair or poor. Only 20% say the quantity of workers is excellent or good; more than twice as many (45%) rate it fair or poor. This outlook is somewhat more negative than it was in 2012.

Skills predicted to be in highest demand by participating businesses in the next few years include:

  • Industry-specific skills, such as medical, utilities, manufacturing, and construction (37%)
  • Computer/IT skills (28%)
  • Work ethic/reliability (11%)
  • Communication (9%)
  • Education (4%)

2014nwct6Talent recruitment in northwestern Connecticut is done most often through employee referrals (73%).

Classified ads—both print (40%) and online (46%)—are also commonly used, as are recruitment efforts at Connecticut schools (29%), placement agencies (24%), job fairs (22%), and temp agencies (20%).

By a ratio of 2:1, employers in northwestern Connecticut believe that schools in their area—and throughout the state—adequately prepare workers for entry-level jobs.

Although confidence in Connecticut’s education system preparing workers for higher-level jobs is not quite as strong, the majority of respondents nonetheless believe Connecticut schools and colleges provide an adequate education for mid-level employees (59% of employers surveyed); management workers (61% of employers); and executive-level employees (58%).

Over the years, surveys of businesses in northwestern Connecticut have revealed persistent concerns about young workers leaving the region for jobs elsewhere in the U.S.

2014nwct7When asked what factor is most to blame for the loss of young workers, 52% of respondents in an open-ended question cited taxes and the high cost of living. Lack of employment opportunities (17%) and better opportunities elsewhere (16%) were also identified.

To a much lesser extent, businesses blamed the region’s lack of entertainment, social, and recreational activities for a younger demographic (8% of respondents).

Transportation

Several studies released in 2013, including reports by CNBC and the national transportation research group TRIP, point up serious deficiencies in Connecticut’s transportation system and underscore the need to invest in infrastructure improvements.

CBIA’s 2013 Connecticut Transportation Survey found numerous adverse impacts on the state’s businesses, include hindering their ability to meet with customers (63% of respondents), delivery logjams (48%), and limiting their market or territory (42%).

Those most negatively affected by transportation challenges in northwestern Connecticut were employees (18% of businesses surveyed), largely because of a lack of affordable public transportation in the region, insufficient east-west highways, aging roads and bridges, and a shortage of rail options.

Six years ago, 81% of northwestern Connecticut companies surveyed said transportation infrastructure improvements were important to maintaining a healthy business climate.

For the vast majority of those surveyed this year (77%), however, transportation is not an issue.

Fewer than one in 10 claimed an adverse impact on business deliveries (7% of respondents) or their ability to receive shipments on time (4%).

This is a significant positive change in a category where other parts of the state still struggle.

Conclusion

Our most recent surveys of northwest Connecticut businesses were conducted in the wake of the Great Recession (2010) and the tepid recovery that followed (2012).

Today, with GDP data and other indicators showing we are on the cusp of a stronger economic upswing, pressure on hiring has increased to meet demand. At the same time, we are seeing increasing numbers of retirees.

Northwestern Connecticut’s workforce challenges, which have always been serious, are now critical.

So too is the need for state fiscal rebalancing and responsibility—a balanced budget that reduces long-term debt, supports vital public services within taxpayers’ means, and creates a more competitive tax structure.

It is important that we engage state legislators and other policymakers in a dialogue about how their decisions affect the state’s business climate and quality of life and ask how they plan to balance the state budget, keep young people here, and make Connecticut a better, more affordable place to live and work.

CBIA, the Northwest Connecticut Chamber of Commerce, and a broad coalition of more than 75 other business, professional, and community organizations have joined together this year to support the CT20x17 campaign, a multiyear effort to advance commonsense policies that accelerate the state’s economic recovery and move Connecticut into the top 20 states for business across all major national business climate and economic competitiveness rankings by 2017.

The 2014 Survey of Northwest Connecticut Businesses was mailed and emailed to 1,400 businesses throughout northwestern Connecticut in September 2014. CBIA received 194 responses, for a return rate of 13.9% and a margin of error +/- 7.2%.