More than 220 companies were surveyed in the Northwest Connecticut Chamber of Commerce and CBIA’s fifth biennial survey of businesses in northwestern Connecticut.
Those companies, which represent a variety of industry sectors, reported on their near-term outlook, the benefits and drawbacks of their location, workforce development priorities, and recommendations for growing the regional and state economies.
The diverse mix of businesses in northwestern Connecticut is reflected in what survey respondents cited as their top regional economic priority: the need for greater regional collaboration among private-sector, nonprofit, and public-sector organizations to attract business investment.
That represented a shift from previous surveys, which historically listed maintaining and expanding the region’s manufacturing base as the top priority. This year, manufacturing was a close second, having been nominated by 56% of respondents.
As in 2014, when we last conducted this survey, retaining young workers was third in importance, cited by 47%.
Improving transportation infrastructure, maintaining and growing regional tourism, higher education investments, and the availability of affordable housing also registered highly.
The regional economic outlook remained positive, although slightly less so than in 2014.
Just over half (52%) of the surveyed companies forecast increased sales revenues for next year, a decline of 7% from the last survey, while 37% expect unchanged revenues, and 11% say their revenues will decline.
The number of businesses expecting pre-tax profits to increase dropped four points from 2014 to 42% in this survey, with 41% expecting no change and 17% forecasting decreases.
One the job front, almost two-thirds (63%, up from 55% in 2014) of respondents expect no changes in their workforce in the coming year.
One-quarter of respondents said they will increase the number of employees in the coming year, a significant decline from 2014 when 36% forecast job growth, while only 12% say they will cut positions over the next 12 months.
Forty-one percent said their businesses were growing, 54% said they were holding steady, and 5% were contracting.
Just over one-third (34%) anticipate needing more space for their business over the next five years.
What are the region’s three greatest strengths?
As with previous surveys, businesses are relatively evenly divided, identifying:
- Location near New York, Boston, and Springfield markets (43%)
- Environment (43%)
- Supportive chamber of commerce (38%)
- Arts, culture, and entertainment opportunities (36%)
- Active local banks (34%)
- North-south highways (26%)
- Other (14%—responses included reliable, capable employees; strong small businesses; reasonable home prices; and public safety)
And the three greatest weaknesses?
In the 2014 survey, cost of living was seen the greatest disadvantage to running a business in northwest Connecticut. That issue was not among the major weaknesses identified in this year’s survey, with workforce demographics driving the top two responses:
- Inability to retain young workers (65%)
- Aging workforce (57%)
- Lack of coordinated/integrated regional marketing (35%)
- Lack of east-west highways (23%)
- Other (17%—responses included taxes and regulations, public school system, and business costs)
- Lack of broadband access (15%)
Driving Economic Growth
Northwest Connecticut businesses are deeply concerned about the strength and growth prospects for both the regional and state economies.
They are particularly anxious about Connecticut’s overall business climate and the inability of the legislature to resolve the state’s ongoing fiscal crisis.
Based on the survey responses, driving economic growth in the region and state will require different approaches and priorities.
For instance, state budget reforms and cutting personal, business, and sales taxes were cited as the top priorities for fixing Connecticut’s economy.
Here’s a sample of what business leaders said about the state’s economic challenges:
- “Taxes are too high in Connecticut. We are chasing residents out of the state. Reduce state spending, cut taxes or eliminate tax increases, stimulate investment, and grow jobs.”
- “We have a skilled workforce, however most people are discouraged by state government, high taxes, public service benefit costs, higher utility costs, and an otherwise generally adverse business environment.”
- “While it is important to attract business to northwest Connecticut, there needs to be an overall paradigm shift at the state level to make Connecticut more attractive to business in general.”
- “The state has pummeled Connecticut’s economy for too many years. We need an entire change of perspective to foster real support for business and growth.”
Investing in northwest Connecticut’s towns and cities and providing incentives for businesses were the main priorities for driving economic growth in the region, with many respondents noting specific regional concerns.
- “The state of Connecticut takes a huge piece of our profit, but is not reinvesting it in helpful areas.”
- “Investing in municipalities means many things and covers infrastructure, affordable housing, economic development, and education.”
- “By creating an environment that incentivizes businesses to invest in our area, we will attract people to the region.”
- “Tourism and retaining local students will help grow regional towns and cities.”
As noted earlier, retaining young workers and the region’s aging workforce are major challenges for northwestern Connecticut businesses.
Area firms are very concerned about finding and retaining good workers.
Businesses face multiple difficulties in filling open positions, with a lack of skilled applicants the biggest issue, cited by 56% of businesses.
Not enough applicants (43%), applicants who are not job-ready (41%), and employers’ inability to meet salary demands (37%) were also identified.
Just over a third of respondents (36%) rated workforce quality as good or excellent, basically unchanged since the last survey; 47% said it was average and 17% said it was poor or terrible.
Only 19% said the availability of workers was excellent or good, compared with 20% in 2014, while 50% (45% last survey) rated it fair or poor.
Fifty-nice percent of respondents reported recent difficulty filling positions for midlevel workers, while slightly fewer have had trouble filling entry-level and management positions (55% each).
In terms of regional and state education resources meeting their needs, only regional education for entry level workers at 50% was at or above the midpoint. All other resources were worse at meeting workforce demand.
Regarding the productivity of new hires, 55% of companies said they were as or more productive than existing workers, while 45% said they were less productive.
So how do the region’s employers recruit new workers? They use numerous strategies, including:
- Employee referrals, 72% (last survey 73%)
- Online job sites, 51% (41%)
- Newspaper ads, 28% (41%)
- Recruiting through Connecticut schools, 21% (29%)
- Temp agencies (18%)
As in prior surveys, the rapid rate at which the region loses young workers to careers elsewhere in the U.S. was a critical challenge.
When asked why employees leave the region, most survey respondents cited the state’s high cost of living, particularly taxes and housing. The top responses:
- Taxes/cost of living: 50%
- Perceived lack of employment opportunities: 34%
- Not enough to do in the area (lack of entertainment): 11%
- Other: 5%
“Connecticut needs stability so people can trust and believe that this is a state where they have a future,” said one respondent.
Businesses said taxes and fees were the greatest concern, including the personal income tax, overall business fees and penalties, property taxes, and the corporate tax.
We also note some concern about businesses or executives leaving the state. Sixteen percent say they are planning to move at least some operations out-of-state.
More alarmingly, 39% say they themselves may move to lower their personal cost of living.
Transportation & Marketing
While 66% said transportation is not an issue, for others, it’s a serious challenge. The biggest problem is transportation for employees to get to work—an issue that exceeds problems associated with deliveries and shipments.
The most problematic regional transportation issues include:
- Affordable public transit (37%), up considerably from the last survey (20%)
- Insufficient east-west highways (27%)
- Insufficient Metro North transportation (14%, up from 11%)
Surprisingly, there was little concern expressed about aging infrastructure—obviously there have been positive changes since 2014.
Marketing was cited as an issue in this survey. Last survey, nearly half the respondents lamented high marketing costs for their firms.
Key resources to market products and services now include:
- Word of mouth (75%)
- Web advertisements (63%)
- Social media (54%)
- Print advertisements (52%)
- Northwest Chamber (30%)
- Other, including radio, TV, direct mail (24%)
Tourism, Arts, & Culture
Tourism has an impact on the region far beyond tourism-specific businesses, with 28% of firms saying it is a significant benefit to the area.
Awareness of area attractions was high among survey respondents. These attractions resonated with more than half of respondents:
- Warner Theatre (97%)
- Sharon Playhouse (71%)
- KidsPlay Museum (67%)
- Five Points Gallery (63%)
- American Museum of Tort Law (58%)
- Future American Mural Project (52%)
This survey shows that despite the many challenges, northwest Connecticut businesses are performing marginally better than their counterparts in other areas of the state.
Area firms report slightly more growth than those in other parts of the state, and many forecast future sales gains, profits, and hiring.
However, there is a real need for regional cooperation, increased support for area manufacturers, and renewed efforts to keep young, skilled people in the area.
Strategies for driving local economic development and making towns more attractive, particularly for young people, are critical regional priorities.
Anxiety among the region’s employers about Connecticut’s fiscal situation and the state’s lackluster economic recovery remain.
If the state gets its act together, the Northwest Corner will be sure to follow.
The region’s businesses expect that their local state senators and representatives will focus on Connecticut’s fiscal and economic challenges when the General Assembly convenes in January.
It’s an expectation they share with their peers throughout the state.
It is noteworthy that the Northwest Chamber, in collaboration with a number of partners, has embarked on important initiatives that address the concerns of the business community.
There is still much work to be done, but it is encouraging that the region is moving in the right direction.
Methodology & Demographics
Survey questionnaires were emailed in September 2016 to 1,181 businesses throughout northwestern Connecticut.
We received 229 responses, for a return rate of 19.4% and a margin of error of +/-2.3%.
The vast majority of companies surveyed (88%) are headquartered in Connecticut, with 11% based elsewhere in the U.S.
The largest share fall into three industry categories: manufacturing (19%); finance, insurance, and real estate (19%); and professional services (14%).
Other represented industries included nonprofit (12%), construction (7%), retail (7%), medical (7%), hospitality and tourism (2%), food service (2%), software and technology (1%), and entertainment (1%).
The greatest number of respondents’ firms (29%) are privately held, while 26% are incorporated, 23% are LLCs, and 21% are family-owned.
Twelve percent are women-owned businesses, 7% are veteran-owned, 2% are minority-owned, and 1% are foreign-owned.
The average respondent’s sales for the past year was $5.235 million, with the mean response at $1.1 million.
The average firm contributes 19% of total payroll to employee benefits.
The survey was sponsored by Altek, BD, Commercial Real Estate Group, Dymax Corporation, Litchfield Bancorp, Northwest Community Bank, Northwest Connecticut Chamber of Commerce, Northwest Regional Workforce Investment Board, Sharon Hospital, Sullivan Automotive Group, Torrington Savings Bank, and Webster Bank.