Connecticut will suffer a significant drop this year in the number of businesses that are profitable, a new survey shows, even as owners steel themselves for hikes in the state minimum wage and the potential coronation of a labor union organizer in the state legislature.
Some 58 percent of businesses expect a profit this year, down from 70 percent in 2007 according to an annual survey published in early September by the Connecticut Business and Industry Association (CBIA). If those predictions hold up, it would represent the first drop in profitability since 2004, when 60 percent of respondents recorded a profit.
“There is going to be some tough sledding still ahead,” said Peter Gioia, vice president and economist at CBIA. “This is not a year to pop open the champagne corks and think that everything is hunky-dory.”
As of June, 14 percent of 750 businesses polled predict a net loss for 2008, with CBIA and fellow pollster BlumShapiro assigning a margin of error of less than 4 percent on the results. BlumShapiro partner Jay Sattler said the results were not as bad as some had feared.
“Businesses are more reserved, but they are still very optimistic,” Sattler said.
The midyear survey is not always an accurate measure of future prospects; whereas just 6 percent of businesses predicted in last year”™s survey they would lose money in 2007, more than triple that number actually did so at year end as credit markets began collapsing late in the year.
Ever-escalating business costs were also a culprit, respondents carped. In a surprising revelation, more than one in 10 businesses said they would consider moving out of Connecticut if energy prices cannot be reined in, and nearly a quarter of businesses indicated high energy costs have impacted their ability to hire additional workers.
Only half of businesses indicated they have been able to pass on higher energy costs to customers, with the remainder presumably taking a hit to their bottom line. The poll was taken in June when the price of oil reached record highs before receding significantly by the close of August.
The governor and legislature have yet to cure what businesses regard as the biggest challenge to doing business in Connecticut ”“ the cost of health care. The percentage of businesses singling out the cost of health care rose slightly, from 50 percent in 2007 to 53 percent this year as businesses eye potentially another double-digit increase in premiums.
Employers singled out employee wellness programs and health-savings accounts as the best strategies to reduce costs, followed by fewer mandates forcing insurance carriers to cover ailments.
Gov. M. Jodi Rell focused the previous legislative session on extending health care benefits to individuals who lack insurance, via the Charter Oak Health Plan that offers lower premiums than many insurance plans.
“The legislature has to get serious about the whole issue of costs,” Gioia said. “The business community will certainly be receptive in any real effort to control costs, but we are not going to be fooled either by a lot of smoke and mirrors.”
CBIA and other lobbyists are unsure of what to expect in the coming legislative session in January, following the departure from the Connecticut General Assembly of Milford Rep. James Amman.
The frontrunner to take Amman”™s place as speaker of the house is Rep. Chris Donovan, a labor organizer from Meriden.
Gioia indicated CBIA had been influential in the Amman era on bills affecting business, but cautioned all bets are off with the new leadership and encouraged businesses to mind doings in Hartford this winter.
 “If you don”™t, you are going to have some pretty ugly results,” Gioia said.
