Survey Finds Companies Continue To Invest Even As Economic Uncertainty Lingers
Profitability was flat, but individual companies are beginning to make investments in new technology and employee training. That’s the good news according to this year’s annual survey by the Connecticut Business Industry Association and Blum Shapiro.
The survey released Friday at the Connecticut Economy conference in Rocky Hill was emailed to 5,112 businesses in late June and July. Only 377 — or 7.4 percent — of the companies responded, which is slightly lower than in previous years.
But Thomas Devitto, chief marketing officer at Blum Shapiro, said some of those companies may be suffering from survey fatigue. He believes the numbers presented in the survey reflect what the business community is feeling in the state, even if the response rate was lower than in previous years.
This year’s survey found that Connecticut’s economy is the greatest concern for 34 percent of the businesses in 2013, followed by 21 percent who said their greatest concern was national economic uncertainties. Another 14 percent put the onus on the tax burden, 11 percent believe it’s the implementation of Obamacare, and 9 percent say it’s the cost of compliance with federal and state regulations.
DeVitto pointed out that the survey was sent to businesses before the Obama administration postponed the large employer mandate until 2015.
“We have a lot of companies out there who have expressed a lot of frustration and angst with the Affordable Care Act,” DeVitto said.
In an open-ended question, the survey asked what companies were doing to prepare for implementation. The responses ranged from “no new hires” to “talking to advisors” and “raising deductibles to mitigate the price of increases.”
The survey found a majority of businesses did not have enough information to proceed with formulating a plan for how to address it.
But at least 54 percent of the businesses surveyed said they appreciated Connecticut’s quality of life and believe it’s one of its greatest business assets, followed by proximity to customers and major markets.
While the businesses surveyed gave the state high marks for its quality of life, the survey also found that 80 percent have a negative or somewhat negative opinion of Connecticut as a place to operate a business. Nearly two-thirds or 65 percent are somewhat or very pessimistic about the state’s economy over the next five years.
The survey found an increase in the personal income tax rate adopted in 2011 has had a lingering effect on Connecticut business owners. According to this year’s survey, 62 percent reported a direct impact on their company budget and consequently, decisions on hiring, capital investment, and expansion. Last year, 79 percent of businesses surveyed said the tax hike had a negative impact on their firms.
“I don’t think they’re happy with the rate being where it is,” DeVitto said. However, initial anger over the increase seems to have subsided somewhat since it was initially implemented.
In 2012, a year after the income tax rate was increased, the survey found that one in three businesses were looking at moving or expanding in another state within the next five years. This year, 21 percent of businesses surveyed were inclined to consider relocation. That’s down from about 30 percent, “but again I think there was just a lot of anger with what was going on with the personal income tax,” DeVitto told a group of business executives.
Peter Gioia, an economist with the Connecticut Business and Industry Association, said the perception that the state is not friendly to business is something the state needs to work upon.
When it comes to attitudes toward business, “policymakers still have some work to do,” he said.
He applauded the efforts of Department of Economic and Community Development Commissioner Catherine Smith whose department is going around the state and holding meetings to let businesses know about state programs that may benefit them.
“There are things that can be done and they don’t cost money,” Gioia said. “It’s just an attitudinal thing.”
He said the economy is on the cusp of businesses having the opportunity to grow, but where they grow is another question.
The survey found that nearly one-third of businesses were approached by other states in the last five years about relocating or expanding, with most of the activity occurring in the past 12 months. More than half of the manufacturers surveyed received offers from other states.
The states most actively recruiting are North and South Carolina, Florida, Virginia, and Texas.
Fred Carstensen, an economist the Connecticut Center for Economic Analysis, said Connecticut isn’t seeing the strong recovery that other states are seeing.
“We have not been doing as well as the governor had anticipated when he was constructing his budgets,” Carstensen said. “So there’s still a question mark about our fiscal stability in Connecticut.”
“Are we really going to be able to avoid tax increases or some significant cut in public services?” Carstensen wondered.
According to Gioia that’s the only way to restore business confidence in the state. He said state legislators need to control state spending and balance the budget without any tax increases.
Carstensen said there are some really ambitious initiatives to jump start economic activity in the state like Bioscience Connecticut, the $864 million expansion of the University of Connecticut’s Health Center campus in Farmington. The state’s $291 million investment in Jackson Laboratory is another initiative, he said. Projects like these, if carried through, would help to change the economic trajectory of the state, but “none of that stuff is short-term,” Carstensen said.