The lack of confidence shown by Bermuda’s business leaders in the island’s economic future is a “canary in the coal mine”.

That is the view of market research firm executive Margaret Chapman, one of the organisers of the Bermuda Business Confidence Survey.

She made her comments while presenting the results of the survey, which showed a 19.1-point plunge in business confidence to 86.4 from 105.5 in the last survey in 2016.

The survey also found that fewer than half of business leaders polled were confident in Bermuda’s economic future and only 8 per cent were highly confident — down from 24 per cent two years ago.

“That’s a canary in the coal mine,” Ms Chapman, who is vice-president of Corporate Research Associates, the Canadian firm which partnered with Total Research Associates and sponsors HSBC Bermuda to conduct the survey.

“It’s really not good to have less than 10 per cent of the business community highly confident in the future.”

Ms Chapman added that there was also a record number of businesses pessimistic about their own future.

“When people don’t feel confident about the future, they are less likely to take on risk and try out new ideas, and more likely to focus on efficiency and that has an impact on the economy,” she said.

She added that the timing of the last survey, with anticipation of economic stimulus growing in the year before the America’s Cup, is a factor to consider when making comparisons.

The Bermuda Chamber of Commerce and the Bermuda Economic Development Corporation, a body that helps and advises budding small businesses, encouraged their members and clients to participate, to ensure a broad representation of Bermuda business in the survey.

The survey is based on the benchmark set at the time of the first survey in 2014. This year marks a record low and the first time it has fallen below 100.

The top three issues facing Bermuda businesses were Government and politics, taxation and the cost of doing business.

The leading factor that could bring positive change to the business climate was immigration and better work permit processes, cited by 24 per cent of respondents.

Better government leadership and political stability came in second, closely followed by business development, growth and foreign investment. Better taxes came in fourth.

Many businesses cited engaging with the Government as the best way of fostering a better working environment, as well as supporting more education and training programmes and collaboration among businesses.

Those with business operations only in Bermuda were slightly less confident than those who also had operations overseas. There was a stark difference between the confidence levels of small businesses (99.1) and large businesses (70).

“The Government is making a concerted effort to provide some focus to our small- and medium-sized sector,” Erica Smith, executive director of the BEDC, said.

“The survey is a reflection of the confidence they’re feeling that finally someone is listening, and finally someone is creating policies to address their specific needs.

“Since April 1, there have been a number of initiatives that have been rolled out, and because of that I think in a year from now we’ll see positive growth in their confidence.”

Both Ms Smith and John Wight, president of the Bermuda Chamber of Commerce, said that a population increase would greatly help businesses and Bermuda’s economic prospects, and they urged a more “realistic” approach to immigration policy.

The executive summary of the survey states: “The record-low BCI reflects a widespread pessimism in Bermuda’s private sector about the state of the island’s economy and its prospects over the coming 12 months.”

It adds: “Specifically, a majority of business leaders believe the island’s economy is not moving in the right direction (notably, the percentage with an optimistic outlook has fallen from 79 per cent in 2016 to only 38 per cent this year).

“For the first time since these surveys began in 2014, more business leaders believe the economy is in worse shape today than a year ago, versus those who say it is in better shape. Also for the first time, those who believe the economy will continue to deteriorate outnumber those who believe it will improve.”

The survey identified the island’s economic challenges as including the ongoing transfer of domestically earned income overseas, an onerous payroll tax, and an ageing and declining population.

Meanwhile external US corporate tax reforms, the threat of Brexit and rising global trade protectionism generally, all create uncertainty for Bermuda’s economy.

“Amid these internal and external pressures, it remains unclear what forces, beyond government spending, including on public capital projects, and the potential spillover benefits of a booming US economy, will lift the economic fortunes of the island in the near future,” the report adds.

Bermuda’s business community is “becoming increasingly concerned about the structural state of the island’s economy, its competitiveness and its ability to attract investment”, the report continues.

“Some relief may be available in the form of higher government spending following years of austerity (civil servants received a 2.5 per cent pay raise in the most recent budget), and in efforts announced by Premier David Burt to begin making structural changes, such as allowing majority, non-Bermudian ownership of domestic businesses, thereby encouraging the investment of locally earned revenues back into the island economy.”

• See the full report on this webpage under the heading of Related Media