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Area Development - Site Selection, Facility Planning and Workforce Development

33rd Annual Survey of Corporate Executives Commentary: The Effects of Tax Cuts, Tariffs, and a Skilled Labor Shortage on Facility Plans

While the long-term effects of recent tax cuts and increased tariffs on facility plans remain to be seen, difficulty in finding a workforce with the required skill sets is a continuing problem.

Q1 2019
Last year we saw a great deal of activity even with uncertainty created by tariffs and the trade war with China. For many site selectors, activity levels in 2017 and 2018 were the highest in recent years, across multiple industries, both office and industrial. In general, there was activity in nearly all parts of the country. The Corporate Survey shows that in 2018, new facility plans were minimally affected by these items. The new tariffs and trade war will have only a slightly greater impact on future new facility plans, according to the survey.

There were also questions regarding whether the Tax Cuts and Jobs Act of 2017 would spur business expansions. Typically, growth driven by tax cuts doesn’t occur immediately, which the survey validates as it shows that growth related to the tax cuts was minimal in 2018; however, the impact of the tax cuts on future plans is projected by nearly twice as many respondents.

Over the last few years we have seen a change in staffing plans for many industrial facilities. Manufacturing and distribution facilities continue to automate, requiring increased capital investment but with a reduction in headcount. This is substantiated by the survey — 71 percent of the respondents say their new domestic facilities will add fewer than 100 jobs.

While this is a positive news in a tight labor market, the challenge is finding an employment base with the required skill sets. While the headcount requirements have declined, those positions now require a higher skill set. It is no surprise that availability of skilled labor is now the number-one site selection factor.

Finally, an interesting result in the survey is related to total headcount to be created at new foreign facilities: 43 percent of the Corporate Survey respondents say their new foreign facilities will create 100–499 jobs, which is twice the percentage indicated for 100–499 headcount creation in new domestic facilities.

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