HARTFORD, CT — The Connecticut Business and Industry Association survey of 356 businesses found that 70% turned a profit last year, but only 23% are looking to add workers.
The survey found 43% of businesses reported sales growth in 2018 — up from 36% in the previous year and the highest in five years.
The state’s economy grew 1% in 2018, expanding for the first time since 2015. Many of the companies are benefiting from a strong national economy with increased productivity, tight cost controls, and greater workforce retention.
“Connecticut companies are still doing well,” Michael Brooder, managing partner of Marcum LLP, said.
However, only 36% of respondents said they would introduce a new product here in Connecticut in the next 12 months.
Connecticut businesses still struggle with taxes, labor, and energy, according to the survey. Trade tariffs also factored into losses for exporters and companies that import raw materials. Almost 48% of the businesses surveyed said they were somewhat or very concerned about the negative approach to trade and tariffs. An estimated 28% are not concerned; 22% were neutral.
The survey found one small business lost a multi-million contract to a plant in Georgia because they were unable to match a competing bid.
However, the growth numbers were weaker for small businesses. Thirty-five percent of businesses with fewer than 100 employees reported growth and 47% said sales were unchanged.
The two biggest changes in state policy over the past year were the passage of a Paid Family and Medical Leave program and an increase in the minimum wage, which starts on Oct. 1.
“There’s the uncertainty and unpredictability of the state legislature when it comes down to budgets and decision-making,” Brooder said.
The survey also found 81% of business owners believe Connecticut’s business climate is declining. That’s up 61% from last year.
CBIA President and CEO Joseph Brennan said small businesses were frustrated by the 2019 legislative session because they felt unfairly targeted by these policy changes.
A majority of businesses have a pessimistic outlook for the Connecticut economy — just 11% see the state’s economy expanding in the next 12 months while 29% see no change and 61% are forecasting a contraction. That’s an increase over last year’s survey which found 30% predicted contraction and 18% predicted growth.
The businesses that responded to this survey may not be the same businesses that responded to last year’s survey.
As far as the state policy changes are concerned, Max Reiss, Gov. Ned Lamont’s communications director, said the passage of Paid Family and Medical Leave and the phased-in increase of the minimum wage are important measures, which surrounding states have already passed. He said they will contribute to the personal financial security of families across Connecticut.
“The governor was proud to sign them into law,” Reiss said. “The governor is thrilled to see economic growth on the rise in Connecticut and wants to pursue policies that support that growth. That is why the governor has spent so much time connecting with top executives from major Connecticut companies, looking for their input and guidance.”
Kristofer Kolstad, vice president of marketing and business development for Kaman Specialty Bearings & Engineered Products, said their workforce is global so the increase in the minimum wage doesn’t really impact them since all of their employees make more than minimum wage.
But it’s the cumulative effect of all the changes to labor and tax law over the years that gives companies a headache.
“The complexity of doing business in Connecticut and abiding by the tax law and all of the other regulations — we pay a team of people in Bloomfield who do just that,” Kolstad said. “That’s a cost in and of itself and it gives our CEO a headache.”
He said the “brand” of Connecticut is still as a place that’s not friendly to business because the actions “still don’t fully embrace what business leaders are talking about.”
He said the cost of doing business in Connecticut coupled with its unfunded pension liability is still part of Connecticut’s “brand.”
“To think about expanding and investing tens of millions of dollars in new factories in Connecticut, versus say Alabama, Texas, or some other state is sometimes really tough,” Kolstad said.
He said Connecticut has a very skilled workforce, but it’s really hard to relocate employees from other states because of the high cost of living.
The survey found that Connecticut continues to face a critical shortage of skilled workers that is compounded by a shrinking labor force, population loss, retirements, and the state’s high cost of living.
Fifty-five percent of businesses surveyed have issues both finding and retaining young workers.