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Massachusetts Small Businesses Are Increasingly Cautious about Local and National Economies, Survey Shows

SB Informer
Thursday, August 10, 2006; 03:44 AM

Massachusetts small businesses have a more cautious outlook on the local and national economic climate than last year, according to a recent Citizens Bank Small Business Pulse Survey released yesterday. Fifty-two percent say that the economic climate in America is getting worse, an increase from 44 percent last year. Forty-five percent of small businesses say the economic climate in Massachusetts is also getting worse, an increase from 37 percent last year. Also, only 21 percent of small businesses say they will increase their workforce next year, down from 40 percent in 2005.

This is the second year Citizens has conducted the Citizens Bank Small Business Pulse Survey in Massachusetts to explore and track issues impacting small business growth. This survey was conducted from June 8 to 22, 2006 by Opinion Dynamics Corporation and consisted of interviews with 200 business owners and senior managers of Massachusetts companies with annual revenues between $100,000 and $10,000,000.

"Small businesses are crucial to the health of the nation's cities and vital to the Massachusetts' economy," said Hal R. Tovin, Group Executive Vice President, New England Retail, In-Store and Business Banking, Citizens Financial Group. "While small companies account for about half of all jobs nationwide, they provide 80 percent of inner-city jobs. There's a recognition that we're in a tough economy, but small businesses haven't given up on growing. With this in mind, we at Citizens feel it is essential to recognize how and why small businesses are challenged during these changing economic times."

The survey shows that, despite the challenging year, forty-two percent of Massachusetts small businesses have increased their gross revenues in the past year, while 26 percent had a decrease and 33 percent had no change. And notwithstanding the gloomy economic outlook, two-thirds of small businesses project that they will maintain a full work force in the next 12 months, and about half (45 percent) will maintain the same level of capital investments.

The findings also reveal that many (85 percent) small businesses say the main challenge to growth is the cost of providing health insurance and benefits to its employees. Nearly two-thirds (65 percent) of businesses say fuel costs increases have had a negative impact or some impact on their business operations, hurting their ability to increase capital expenditures. Other concerns shared by the majority of small businesses include:

-- costs of insurance not related to employee health insurance (75 percent concerned)
-- finding new customers (66 percent concerned)
-- retaining or recruiting employees due to high cost of living in Massachusetts (65 percent concerned)
-- strength of the US dollar (64 percent concerned)
-- corporate income taxes (60 percent concerned)

The Citizens Bank Small Business Pulse Survey also reveals that small businesses overall do not think they will be impacted by the employee-based reforms now proposed for legislation. About 24 percent say the minimum wage hike will impact their ability to increase spending or expand their workforce. Only one-quarter (25%) of small businesses say the health reform legislation will negatively impact their ability to increase capital expenditures, and 28 percent say the legislation will negatively impact their ability to expand their workforce. And only about half (53 percent) are aware of the proposed family leave plan with about two-fifths saying it will negatively impact their ability to increase spending and hire more employees.

Other key findings of the research include:

-- The majority (60 percent) of small businesses are not concerned about the costs related to heightened security measures.
-- Almost half (45 percent) of small businesses are planning the same level of capital investments in the next 12 months, while 38 percent are planning to increase capital investments.
-- A majority (54 percent) of small businesses had no change in their workforce levels in the past year, while 24 percent increased their workforce and 22 percent decreased their workforce.
-- Nearly all (95 percent) small businesses saw no impact from the "Day Without Immigrants."

The Pulse Survey was conducted as part of the Citizens Bank Small Business Peak Performance program, which is a multi-faceted campaign that provides information, visibility and other resources to arm small businesses with the tools they need to help them grow and expand. The program was launched in 2005, and recognizes, through its Peak Performance Award program, small businesses that have achieved exceptional growth. This year, the Peak Performance program will expand throughout New England, with events, award presentations and surveys being conducted in Massachusetts, New Hampshire and Rhode Island.

Citizens Bank of Massachusetts is a $35 billion bank with 262 branches and 623 ATMs stretching from greater Boston to Cape Cod and the Berkshires. It is headquartered at 28 State Street in Boston. It is a subsidiary of Citizens Financial Group, Inc., a $155 billion commercial bank holding company headquartered in Providence, R.I. Citizens has more than 1,600 branches, approximately 3,700 ATMs and more than 26,000 employees in a 13-state retail branch network and has non-branch retail and commercial offices in about 40 states. Citizens is the eighth-largest commercial banking company in the United States ranked by deposits as of September 30, 2005. Citizens is owned by RBS (The Royal Bank of Scotland Group plc). Citizens' Web site is citizensbank.com.