Upstate New York CEOs are “guardedly optimistic” that 2021 will be better — meaning “better than the depths of the pandemic” not better than conditions and expectations were prior to the COVID crisis.

Looking forward from now through the balance of 2021, 40 percent expect economic conditions in New York to be either a little better (35 percent) or considerably better (5 percent), while 43 percent expect economic conditions to get worse in 2021.

That’s according to the 14th annual Upstate Business Leaders Study, conducted by Siena College Research Institute.

“With only 40 percent feeling as though conditions are going to improve, I call that guardedly optimistic,” Donald Levy, director of the Siena College Research Institute, tells CNYBJ in an interview. “As the relief-package money percolates through the economy, as more people are vaccinated, and more commerce takes place, and a lot of consumer-driven spending starts to work itself into the economy [then] there will be more improvement.” 

Upstate CEOs assess their industry prospects for the rest of 2021 similarly to the overall conditions, as 40 percent expect improving conditions while 39 percent anticipate further worsening. Those in the engineering/construction (55 percent worsening) and food/beverage (46 percent worsening) sectors are the most pessimistic, per the Siena data.

“I was a little surprised that we didn’t see more people, more of the CEOs indicating that they expected 2021 to be at least somewhat better, especially when you consider how much the economy and the economic conditions in their industry have fallen over the last year,” Levy says.

Four in five CEOs (80 percent) say that economic conditions in New York state today as compared to a year ago, before the coronavirus, are either a little worse (30 percent) or considerably worse (50 percent). Only 9 percent say conditions are better today than just prior to the pandemic.

“There’s no doubt that COVID and what has happened to the economy has dramatically affected these CEOs,” says Levy.

A year ago, only 36 percent of CEOs said that conditions had been worsening (2019-2020) while at that time, 17 percent thought that economic conditions had been improving.

SRI released the Upstate Business Leaders Study on April 9. The survey is sponsored by the Business Council of New York State. 

SRI interviewed 1,036 CEOs of upstate New York companies between Jan. 12 and March 12 of this year for the study. CEOs represented firms working in industry sectors that included service (25 percent), manufacturing (16 percent), engineering and construction (11 percent), retail (10 percent), food and beverage (7 percent), health and human services (7 percent), professional services (7 percent), financial (6 percent), entertainment and tourism (6 percent), and wholesale and distribution (5 percent).

Additional CEO thoughts 

When asked about conditions in their industry today compared to a year earlier, fewer respondents (69 percent) say that economic conditions in New York have worsened for their industry, while slightly more (17 percent), say they are better.

The survey also found 61 percent of CEOs think that their company will continue to be in business in New York 10 years from today, while 14 percent think it will not be and 25 percent don’t know. 

At present, only 11 percent think that the general business climate in their local area is improving while 48 percent think it is remaining the same and 41 percent think it is worsening. No more than 15 percent of CEOs of any region (Mid-Hudson) think that their immediate area is seeing improving business conditions.

When asked about the national economy, 39 percent of CEOs think it very likely (24 percent) or almost certain (15 percent) that the U.S. economy will be in a recession between now and the end of 2021. An additional 35 percent think a recession is somewhat likely while 26 percent think it either not very likely (23 percent) or not at all likely (3 percent).

COVID-19 impact

The high percentage of CEOs that say that economic conditions have declined for upstate New York businesses and that their company’s financial situation has worsened over the last year “testify to the dramatic impact of COVID-19,” Siena said.

When asked to name both their areas of concentration and challenges for the coming year, dealing with COVID-19 is third behind typical growth strategies (expansion of existing markets and growth in existing markets). The survey found 42 percent say that dealing with COVID-19 will be a “major area of concentration” for their company in 2021. 

The continuing impact of COVID-19 (75 percent) is cited most often as the challenge that concerns CEOs at a rate even greater than dealing with adverse economic conditions (65 percent), and both governmental regulation (59 percent) and taxation (59 percent).

The pandemic has resulted in decreasing revenue among 67 percent of CEOs, decreasing profitability among 66 percent, and a demand drop for their product or service among 51 percent of CEOs. 

At the same time, 75 percent of CEOs say that COVID-19 has increased their cost of doing business. More than 80 percent of CEOs in food/beverage, wholesale/distribution, retail, and manufacturing say the pandemic has increased their cost of doing business.

In response to the pandemic, CEOs have made operational changes that may affect the way their business runs and the upstate New York landscape moving forward, according to Siena.

For example, 57 percent of CEOs have increased the ability for their employees to work from home and 48 percent of those plan to keep this indefinitely.

In addition, 13 percent of upstate CEOs have reduced their office space, 7 percent plan to make this change within the next six months and 57 percent of those plan to keep this indefinitely. Reduction in office space and the long-term impact of that change is “greatest” among businesses in the professional services and service sectors, Siena found.

The findings also indicate that 45 percent have added new COVID-19 specific products or services, 53 percent say they do not plan to add specific products or services.

The survey found 42 percent have increased information-technology (IT) support for their employees while 47 percent have increased technical-security measures. In both cases, about 40 percent of those CEOs plan to keep those changes indefinitely.

In addition, 75 percent of CEOs say they’ve received federal funds to assist them in either keeping their business open or to adapt to COVID-19 requirements. 

“The [SBA Paycheck Protection Program] money that three quarters of them received was very helpful,” says Levy. “We had some anecdotal comments to that effect … that it was a lifeline.”

And 62 percent of CEOs say COVID safety measures have had a “significant financial impact” on the cost of doing business (26 percent very significant plus 36 somewhat significant). Only 38 percent say the financial impact is not too or not at all a significant impact.

The survey also indicates 40 percent of upstate CEOs think New York State restrictions have been too strict, 58 percent say about right, and 2 percent say not strict enough.

When asked to choose from one of three descriptions that would best capture the state of their business when the pandemic is no longer a threat — 37 percent expect to emerge from the pandemic as a stronger business well positioned to be successful, 50 percent expect to survive the pandemic and be in a position similar to where they were before the virus hit, and 14 percent say, they may or may not survive but any way you look at it, the pandemic has taken a large toll on them. 

Prospects for 2021

Despite the impacts of COVID-19, looking to the year ahead, upstate CEOs make projections for their revenue, profitability, asset acquisitions, new initiatives, hiring, and wages.

The survey found 34 percent anticipate growing revenue, 31 percent say revenue will stay the same, and 35 percent expect their revenue to decline. Last year, 41 percent expected an increase in revenue while only 24 percent expected a decline.

In addition, 25 percent expect to increase profitability, while 42 expect profit to decrease. Last year, 34 percent expected increasing profitability while 32 percent anticipated declines.

The findings also indicate 27 percent of CEOs plan to increase their workforce, 62 percent say their workforce will remain the same, and 10 percent plan to decrease the size of their workforce. These plans appear to be like last year when 30 percent planned to increase, and 12 percent planned to lessen the size of their workforce. However, given that 48 percent of CEOs told Siena that an impact of COVID-19 was decreasing the size of their workforce, “it seems that increases projected in 2021 may only serve to approach returning the workforce size to pre-pandemic levels,” Siena said.

Only 41 percent plan to invest in fixed assets, which is down from 51 percent a year ago and 10 or more points below the planned level of fixed-asset acquisition that the data has indicated for more than a decade.

Workforce readiness

The Siena survey found only 28 percent of upstate CEOs say there is an ample supply of local workers who are appropriately trained, while 61 percent say no. 

“Your area is really … noteworthy — 73 percent of [Central New York and Mohawk Valley] CEOs say there is not an ample supply of workers that are appropriately trained,” says Levy. 

CEOs’ perception of there being an ample supply of trained workers does not exceed 37 percent in any region or 50 percent in any industry group.

CEOs are looking for and have the greatest difficulty recruiting semi-skilled (56 percent) and skilled (50 percent) workers, per the Siena data.