Business confidence slumps for second year
Business leaders' confidence has plummeted for a second successive year.
The Bermuda Business Confidence Index fell 23.6 points to 62.8, completing a drop of more than 42 points over the past two surveys.
The 198 respondents from a broad range of business sizes sectors appeared to have more confidence in the future of their own enterprises than in the Bermudian economy as a whole.
The index hit its lowest point since the survey began in 2014.
The results of the survey, conducted by Total Research Associates partnering with Canadian firm Narrative Research, were presented at sponsor HSBC's Harbourview building yesterday morning in front of a business audience.
Members of Government were also present, including Curtis Dickinson, the finance minister, and Wayne Caines, the national security minister.
Also revealed was a 13-point fall in consumer confidence to 84, as measured by Total Research's long-running Omnibus Survey.
Taxation and tax increases was the top issue for businesses, cited by 43 per cent of respondents. Taxation was not mentioned as an issue in the first survey in 2014.
This was followed by the cost of doing business (38 per cent), government and politics (33 per cent) and poor immigration policies (27 per cent).
Only 41 per cent of business leaders believed the economy was moving in a positive direction or stable, down 43 points from 2018, while 31 per cent were confident in the island's economic future, down 18 points.
But the falls were less pronounced when leaders were asked about their own expectations for next year's revenue, as 69 per cent expected it to be stable or to increase, down eight points from last year.
Furthermore, 72 per cent said they expected capital expenditure for the next year would be unchanged or higher, down six points from a year ago.
Asked which changes would improve the business environment, the top answer was immigration and work permit process improvements, cited by 39 per cent of respondents, followed by business development, growth and foreign investment (31 per cent), better taxes (22 per cent) and better government leadership and political stability (20 per cent).
Margaret Chapman, a partner at Narrative Research, who made the results presentation said that the survey period — March 19 to April 10 — came just after Bermuda had been blacklisted by the EU over a drafting error in its economic substance legislation.
To gauge whether the timing had an effect and with Bermuda now off the list, Ms Chapman said her researchers had carried out a “pulse survey” this week, which produced results that were nearly unchanged.
A panel of businesspeople reflected on the challenges of their sectors and stressed the need for more discussion and collaboration between the business sector and the Government.
Chris Maybury, a board member of the Bermuda Economic Development Corporation, said: “Those figures were terrible, there's no doubt. Certain sectors are going to have a difficult time, retail especially. We've got to be innovative and landlords have got to cut rents. And Bermuda has the double challenge of the Amazon phenomenon, home delivery, which is going to hit us later than everywhere else.”
He added that red tape had been removed and support for start-ups had grown from organisations like the BEDC and the small business incubator, Ignite.
“There's never been a better time for someone who has an idea and is prepared to work hard to start up,” Mr Maybury added.
The need for collaboration with the Government shone through in respondents' comments.
“We need to get that dialogue going, as a business community, and we need to be specific, not just say, ‘it's not good',” Mr Maybury said. “The onus is on us to make sure we have asked the right questions in the right form to the right people.”
Dennis Fagundo, president of the Bermuda Chamber of Commerce, said the survey results were “not a surprise”.
“The sentiment in the community is somewhat negative,” Mr Fagundo said. “There's a lot of external pressures that we don't have a lot of control over, with economic substance and public ownership registries being two examples.”
He added that policy actions to address business challenges needed to be carefully thought through.
“You can't take a broad-brush approach without considering the details,” Mr Fagundo said.
“Now is the time for careful contemplation for considered moves and we need to work together and make sure the moves we are making are moving us in the right direction and not making bigger problems for us down the road.”
Simon Tully, president of the Construction Association of Bermuda, said high-end residential business was holding up because of immigration changes that gave Permanent Residency Certificate holders greater property rights, sparking renovation and rebuilding work.
“We need to breed wealth, we need people to come here and have the confidence to buy an expensive piece of property,” Mr Tully said.
“Contractors are feeling the pinch from the rising taxes and overheads are really biting into margins of small businesses in all sectors.”
People were struggling to find qualified people to work, with many Bermudians more interested in going into financial services than the trades, he added.
Andrea Jackson, a Bermuda Business Development Agency board member and deputy head of trust services at Conyers Trust Company, highlighted challenges that were out of businesses' control adding to uncertainty.
She said the trust sector had been “under attack for over a decade”.
“The trust industry is demonised all the time,” Ms Jackson said. “We're labelled a tax haven, the French call us a ‘coconut jurisdiction'.
“We're used to dealing with that and making the argument that we're complying with international standards, but we're never going to win that argument with the press and the man in the street onshore.”
She added: “Our industry has been drowning in compliance costs and we can't pass those costs on.”
She backed up Mr Tully's view that young people gravitated towards financial services creating skills shortages in the local workforce in other sectors.
“Bermuda has really benefited from reinsurance, but it's also been disadvantaged, because that's what young Bermudians aspire to and those are the salaries they aspire to and that's not realistic for the rest of the economy,” Ms Jackson said. “That's a real challenge.”
She urged the business community to discuss concerns with the Government, and added: “I know it's difficult sometimes to get out of the office, but we all have to get out of our silos and do that.”
Bermuda's blacklisting by the EU for a two-month period had created a knock-on effect in international business, she said.
“Getting off the blacklist was critical, but now we're a few months behind in the clarity that we need for businesses to make decisions: are we staying or are we going?” she said
“How do we make decisions in this uncertain environment?”
Nick Kempe, the shadow finance minister, who was among the audience, said the “increased size of the government machine” was being shouldered by taxpayers.
“The more you tax people, the less they have to spend and it becomes more difficult to run a business as the costs go up,” he said. “And the recent healthcare moves shifted $20 million of government claims history onto the private sector and its workforce.”
Mr Kempe said the Government needed to adopt a more business-friendly approach.
“There's an unwillingness to tackle government spending and passing the buck onto the private sector and there's also the rhetoric vilifying the private sector for simply looking to get a return on risk.”
Immigration reform needed to be tackled with urgency, Mr Kempe added.
“There's two sides to it: the first is getting new people here, having companies want to transfer jobs here and that comes down to the cost of doing business,” he said. “The more you tax, the less competitive Bermuda is.
“The other half is that you have job and wealth creators who have been here ten or 20 years. Why would they stay and spend their savings if they're not afforded some mechanism to anchor themselves here?
“Government's burying its head in the sand on both of those.”