Business executives at small and medium-sized firms expect only limited economic growth in the Chicago area over the next two years, according to a recent bank survey.
The results of the questionnaire may bode ill for employment prospects in the metropolitan area because economists and development specialists say small and medium-sized businesses create most new jobs in the economy.
Fifty-one percent of 588 company executives questioned in late January and February said their firms expect only modest growth over the next two years, while 34 percent said their business and employment levels would remain about the same.
Only 7 percent of the middle market executives predicted their businesses will experience rapid growth, while 8 percent said their businesses will decline.
”Mid-size companies generally feel they face few advantages and many obstacles to doing business,” the report concluded.
The ”The Pulse of Chicago`s Middle Market” was a telephone survey conducted for Harris Trust and Savings Bank by Rabin Research Co. Middle market companies were defined as having $10 million to $250 million in sales. The factors business leaders identified as the most detrimental to business in the region are the cost of employee benefits (60 percent);
government work place regulations (53 percent); other government regulations
(51 percent); and the cost of labor (50 percent).
Also drawing business ire were federal spending and state tax policies. The latter drew a negative rating from 48 percent of the business leaders, who were polled before Gov. James Thompson unveiled his $1.6 billion tax increase plan.
When asked to identify obstacles to expansion, 19 percent of the local middle market executives cited the lack of availability of capital, 18 percent cited the high costs of labor, plant and equipment and 15 percent said their firms suffer from a lack of demand in their markets.
Ironically, 55 percent of the middle market business leaders said the willingness of local lenders to serve their needs made the area advantageous for business activity.
”Most businesses don`t expect much growth over the next two years. It suggests they don`t need capital for expansion,” said Steven Struhl, manager of marketing research for Harris and designer of the survey. ”But they need credit for their day-to-day operations and apparently that`s being supplied.” The survey contradicted previous studies that showed high levels of dissatisfaction with Illinois as a business location. Only four percent of the middle market executives were contemplating an out-of-state move. Another 13 percent said they were planning a move in-state, primarily to locate in larger quarters.
In rating the local business environment, the leaders of small and medium-sized businesses showed a surprising lack of interest in the issues that are trendy in economic development circles.
Just over half of the executives said the local climate for high technology was not an issue for them, while only 9 percent considered it a detriment to their activity. Only 10 percent said they thought Illinois`
educational climate hurt their businesses, while 61 percent said schooling levels are not a factor.
Fully 66 percent said buying of firms by foreign-based companies is not a factor.
