Results of a new Connecticut Business & Industry Association survey indicate that Connecticut’s manufacturers feel they need more assistance from the state in order to remain competitive. The 800,000-square-foot manufacturing complex shown above is located at 225 Episcopal Road in Berlin.

Connecticut has some great incentives for businesses. One of the country’s most educated workforces is located here, and the quality of life is high. But lately, those incentives have been outweighed for many businesses by the state’s increasing cost of doing business, and manufacturers who responded to the Connecticut Business & Industry Association’s latest business survey say the state government needs to do more to help Connecticut businesses remain competitive in the global marketplace.

Fifty-seven percent of respondents to the manufacturing component of the Survey of Connecticut Businesses, which was released last week, said that lowering the cost of doing business should be the top priority of the state government.

“The state can do more,” said commercial broker Tim D’Addabbo of Cushman & Wakefield in Hartford.

Connecticut is facing some stiff competition from other states and countries. Fifteen years ago, manufacturing companies were moving to the South in droves to take advantage of its lower cost of doing business. Subsequently moving to Mexico was the trend; now it’s moving to China. And Connecticut companies are moving for understandable reasons, D’Addabbo said: Other states up and down the East Coast, and states like Arizona, are making it a priority of attracting new businesses and retaining the ones they have, and are often doing a more effective job of it than Connecticut.

“The problem is that the Northeast, due to labor costs and operating costs Â… in comparison to elsewhere, it is difficult to compete,” D’Addabbo said.

Connecticut’s inventory of manufacturing buildings is also causing companies to leave the state. Its inventory is old and is mostly made up of low-ceilinged buildings. But as technology has changed, companies need higher-tech, brighter, high-ceilings buildings to do their jobs, D’Addabbo said. Those are almost nowhere in Connecticut, and with close to no new construction, some companies have no choice but to leave. Other states, like New Jersey, are rife with these buildings, and offer a lower cost of doing business.

D’Addabbo stressed that the skilled and educated labor present in Connecticut is hard to replace. But Connecticut and other New England states have been losing some employee base and, according to CBIA Chief Economist Pete Gioia, are not doing enough to train a replacement labor force.

Companies should not make operational or real estate decisions based solely on what state or municipal assistance they will get, according to D’Addabbo, who added, “I question that.” But many companies have very understandable reasons for leaving the state, he said.

“This is a critical issue,” D’Addabbo said. “We need to do better at company retention and at luring companies here.”

Gioia said he believes the state needs to do a lot more if Connecticut’s economy is going to stay healthy and grow.

“The Legislature just doesn’t get it,” he said. “There are things we can do [to retain businesses in Connecticut].”

‘Great Resistance’

One major problem for businesses is the cost of health care. Its affordability was the top concern of manufacturers for the second year in a row, and many respondents to the CBIA’s business survey indicated they believe the crisis will get worse. Sixty-six percent, or roughly two-thirds, of respondents said health care costs are the most significant concern their companies face. Seventeen percent of executives expect health care benefit costs to increase more than 20 percent over the next year, 59 percent believe costs will rise between 10 percent and 20 percent, and 27 percent think they will decrease by less than 10 percent. One percent of respondents believe the costs will decrease.

“Manufacturers are using numerous strategies to offset rising health care costs, and continue to innovate and implement new products, processes and services necessary to remain competitive,” said John M. Kirschner, partner and director of the Manufacturing Group at the West Hartford-based business consulting firm Blum Shapiro, which produced the study with CBIA, in a prepared statement.

The state has played a major role in the increasing cost of health care, according to Gioia. Over the last 15 years it has passed 16-plus mandates on what has to be covered by health insurance, which Gioia said has made it impossible for companies to offer anything but very comprehensive, expensive health care.

“We don’t have the capacity for a company to offer a bare-bones plan,” he said.

On the federal level, reform regarding malpractice suits also could help lower costs nationwide, Gioia said. The state has done a good job with passing reforms regarding workers’ compensation, he noted, but must keep those in place for businesses to remain healthy.

But the state government has a long way to go in other areas. The high cost of energy in Connecticut is exacerbated by opposition to building new systems for sources of power.

“We’ve had great resistance to building new plants or wheeling in power from other places,” Gioia said.

Additionally, traffic congestion – particularly on Interstate 95 – hurt manufacturing businesses by increasing the cost of transportation. Every time a truck is stuck in traffic on the highway on its way to make a delivery, it costs businesses money.

Property tax reform is also necessary to keep manufacturing businesses competitive. Unlike other states, Connecticut taxes manufacturing equipment and machinery after five years. Other states don’t do that, Gioia said.

“All these things combine to drive up costs,” he noted.

According to the CBIA survey, 18 percent of respondents said the state should do more to cut state spending and hold down tax increases, 7 percent said the state should increase the availability of business loans and other incentives to keep businesses in the state and another 7 percent said the government should ease the regulatory burden of doing business in the state.

“The survey confirms that manufacturers are doing their part to be competitive in the global marketplace, but they need relief,” said Kenneth O. Decko, CBIA’s president and chief executive officer, in a prepared statement. “It’s now imperative for the state to do what it can to allow manufacturers to succeed in Connecticut and help lower business costs here, which are the fifth-highest in the country, according to two recent national studies.”