Manufacturing companies in Connecticut say that, for most of them, doing business is becoming more expensive, according to a new report from the Connecticut Business and Industry Association (CBIA).
CBIA publishes the Connecticut Manufacturing Report annually, attempting to get an overall view of the manufacturing industry in the state and the challenges facing business owners. The 2023 version of this report was published on Wednesday.
According to this year’s report, which includes data through July of 2023, of the state’s more than 4,500 manufacturing companies, 91% say it is getting more expensive to do business in Connecticut. 77% of Connecticut manufacturers reported profits in 2022, an increase from 67% in 2021. 66% of manufacturers expect a profitable 2023. Manufacturing output has also grown above pre-pandemic levels.
Among the reasons for these rising expenses are an increase in labor costs, high energy prices, and high taxes on businesses. According to CBIA, manufacturing in the state provided $292.3 billion in sales and use taxes and $178 billion in 2020 (more recent numbers were not available). Labor costs and taxes were among the largest reasons a company headquartered in Connecticut would locate all or part of actual production elsewhere.
Companies also noted that supply chain issues and inflation, which have caused problems for businesses and consumers since the COVID-19 pandemic began in March 2020, remain an issue for 87% of companies. To deal with the problem, many businesses say they have found backup suppliers or increased costs.
In addition to rising costs, Connecticut manufacturers are also having trouble on the job front. Connecticut’s manufacturing job growth fell in 2023 to -0.9% of jobs, a much steeper slowing of the sector than national averages and the first drop since 2020.
Meanwhile, 86% of businesses say they’re having a hard time finding or retaining workers. Most (50%) say the problem is in hiring, while 35% say they’re struggling with both hiring and retention. As of August, there were 9,000 unfilled manufacturing positions in Connecticut.
The report blames the low workforce on three things: an aging population, stagnant population growth, and high cost of living. Companies, meanwhile, say that applicants often do not possess the necessary skills or expertise, or hiring managers had concerns about work ethic, reliability, and productivity. For applicants that do meet company standards, some businesses say pay is higher in other sectors or that they cannot meet an applicant’s salary demands.
As for the future, the CBIA is optimistic following the March 2023 release of the state’s Strategic Manufacturing Plan which “features ambitious job and GDP growth target rates.” The plan seeks to add 235,000 manufacturing jobs in the next 10 years and increase the percentage of the state’s GDP made up by manufacturing to 20% (it is currently about 10%) by 2029.