In the first attempt to quantify the impact of the recession on small businesses in Connecticut, a new survey suggests less than half expect to turn a profit this year, even as the Internal Revenue Services sweetens a tax break for money-losing companies.
While 62 percent of businesses polled last year by the Connecticut Business & Industry Association (CBIA) reported a profit in 2008, just 42 percent stated they expect to do so this year. A near-even split of remaining companies polled anticipate taking a loss or breaking even at best.
Half of the companies surveyed anticipate growth over the next 12 months, and just four in 10 think Connecticut will have staged a recovery by the end of next year.
The recession forced nearly two-thirds of companies surveyed to trim their work forces, and almost half to cut compensation or other employee benefits. On the plus side, businesses are having a far easier time filling positions with qualified workers, likely the result of layoffs in Connecticut that have freed up experienced professionals who just a few years ago commanded top salaries.
While half of the respondents anticipate a national recovery next year, just 37 percent expect the same to hold true in Connecticut.
“Business profitability took a big hit,” said Peter Gioia, an economist who is vice president of CBIA, speaking recently at a CBIA conference in Rocky Hill. “I think we are going to be challenged on jobs for some time to come.”
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CBIA and the West Hartford-based accounting firm BlumShapiro conducted the poll via email in June, with more than 700 companies responding, most of them small and mid-size businesses. Some 32 percent of respondents provide professional or business services and 30 percent are manufacturers. The poll includes a margin of error of plus or minus 3.7 percent.
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“From a positive standpoint, there does seem to be a fair amount of optimism that you can find in the survey,” said Jay Sattler, a BlumShapiro partner. “An increasing number of businesses are in fact intending to launch new products and services and invest more and more dollars in research and development. I think any time you have that situation, that is a clear indication that there is some optimism out in the marketplace.”
Even as losses ballooned in Connecticut and elsewhere, as part of the American Recovery and Reinvestment Act the Internal Revenue Service has expanded the business-loss “carryback” option that allows companies to offset a loss against profits in previous years, allowing them to lessen their tax burden.
Under the normal carryback option, businesses are allowed to offset an annual loss over the two immediately previous years, but the stimulus bill allows them to do so for up to five preceding years.
The deadline for corporations to claim the one-time benefit was Sept. 15; individuals have until Oct. 15, including small-business owners that report their company income using individual forms.
The tax break is available only to small businesses with less than $15 million in average annual revenue over the past three years.
