More of Connecticut’s businesses are profitable this year than at any other time since the 2008 recession, but fewer than half plan to make job-creating investments in this state and 26 percent plan on moving some of their production to another state or country over the next five years.
That’s according to the latest Connecticut Business and Industry Association/BlumShapiro survey of 331 businesses in the state. The survey was released Friday at CBIA’s annual fall event.
It’s the later statistic that worries economists and business officials, who are hoping policymakers will also find it troubling.
“A lot of times people make investment decisions based on how they feel,” CBIA Economist Peter Gioia said. “You’ve got to take that into consideration.”
All the businesses surveyed have operations or headquarters in Connecticut, and 98 percent of the 115 manufacturers surveyed handle at least some of their production here, but fewer than half say they will continue to make job-creating investments in the state.
The survey conducted between June and July found only 47 percent say they will continue making job-creating investments in the state. It was the first time in 15 years of conducting the survey that the two organizations asked that question.
Nearly every manufacturer surveyed, 98 percent, handles at least some of its production in Connecticut, although 21 percent also have production facilities in other states, and 18 percent handle at least some of their production outside the U.S. Among non-manufacturers, 20 percent have operations outside of Connecticut, and 9 percent outside the country.
More than one in four businesses or 26 percent say their company is considering shifting significant production or operations to another state within the next five years, and 31 percent are looking to set up new operations outside the state.
Reasons cited include lower operating costs and taxes in other states, Connecticut’s heavy regulatory burden, the need to follow high-net-worth individuals who have left the state, and what one respondent termed a “hostile attitude of state government to business.”
“Connecticut does not support businesses,” another respondent wrote.
About half or 51 percent are considering establishing residency outside the state to lower their personal tax burden. While 46 percent of respondents do not anticipate a sale of their company within the next 10 years, 15 percent are undecided, and the rest expect to sell—some as soon as this year.
However, the survey also found that three times more Connecticut companies are expanding than contracting. About half or 51 percent are holding steady. Nearly five times as many companies or 68 percent recorded a profit last year as the 15 percent that recorded a loss.
About 52 percent of companies introduced a new product or service over the past year and 55 percent expect to do that in the coming year. The survey found the greatest barriers to growth include government regulations, taxes, and uncertainty surrounding legislative decision-making and the state’s high cost of living.
The cost of complying with state regulations is the number-one challenge for Connecticut businesses. A close second, according to the survey, was taxes. And third was the uncertainty or unpredictability surrounding legislative decision-making and the state’s high cost of living.
Nine out of 10 respondents agreed with the statement, “I feel that elected officials do not understand my business and its problems.” And only 8 percent believe elected officials really care about helping their business.
But business officials pointed out that policymakers were paying attention enough to override a gubernatorial veto of a bill designed to minimize adverse impacts of new regulations on small businesses by requiring state agencies to evaluate their impact before approval.
The new law, which goes into effect on Oct. 1, puts Connecticut in line with competitor states Rhode Island and Massachusetts, where state agencies must identify specific potential impacts such as additional training, staffing, consulting, legal fees, recordkeeping, reporting, and auditing and declare the extent to which the agencies communicated with small businesses during regulatory development.
In the next legislative session there’s likely to be a debate about an increase in the minimum wage to $15 an hour. On January 1, 2017 the minimum wage will go up to $10.10 an hour.
A majority or 53 percent of businesses, who responded to the survey, said they would invest in robotics or other alternatives to avoid expanding their workforce and nearly one in four would consider closing or moving their operations, if the minimum wage went up to $15 an hour.
“Clearly, although many businesses pay their employees more than the minimum wage, aggressively mandated wage hikes could lead to job losses,” the survey concluded.
The survey also found that one in three companies has been approached by other states about relocating their business. Of those, nine out of 10 are not planning on moving to the states doing the outreach.
The number of businesses considering a move to another state spiked last year.
In the 2015 survey nearly, one in four were planning on moving to another state, and 29 percent were considering shifting significant production to another state within five years, while another 31 percent were weighing expansion in another state within five years.