Businesses shrinking, but still optimistic

Company
owners and managers have a glum outlook on business and the economy in the near
term, a survey of more than 200 businesses has revealed.

About
80 per cent of the 208 people who responded to the Cayman Islands Chamber of
Commerce survey believe the Cayman Islands economy has gotten worse in the past
year; a full 94 per cent believe the Islands are still in an economic
recession.

However,
the vast majority of those surveyed said their confidence in Cayman’s economy
is at least fair, if not good or even excellent.

“We
must put the necessary legislation in place that will give us a competitive
advantage in what will be a very hungry market,” Chamber President Stuart
Bostock said. “We must make sure inward and internal investment is encouraged
and not hindered with ineffective or outdated bureaucracy.”

Bureaucracy
was a major issue among Chamber survey respondents.

Nearly
58 per cent of respondents believe the government has “not become more
responsive to the needs of the business community” in the last six months.

According
to the survey, the main constraints on businesses growth in Cayman are
recruitment and retention of employees, work permit and business fee increases,
direct wage costs, and government bureaucracy.

“The
survey results show that business operating fees are a main constraint for most
businesses,” said Chamber CEO Wil Pineau.

Within
the current budget year, the government has increased fees for work permits by
an average of $3,000 per year in professional job categories. A number of fee
increases – particularly on those charged to the financial services industry –
also took effect in January.

Against
the background of increasing fees, the Chamber stated it does not support the
proposed 25 cents per gallon import duty increase on gas and diesel fuel.

“[It]…is
another significant burden that will drain the resources of many local
businesses and the community at large,” a Chamber press release stated.

The
government has said the duty increase would raise $10.2 million in the upcoming
budget year, helping to reduce an operating deficit that is expected to be more
than $30 million by June 2011.

Chamber
members who responded to the survey also said the recent economic downturn has
caused their businesses to reduce prices, cut hours, lay off employees and cut
employees’ wages.

Most
Cayman Islands businesses surveyed reported a decrease in profits in the last
quarter of 2009. More than 70 per cent reported no increase in profits for all
of last year.

More
than half of the respondents believe their business revenues will not increase
this year, either.