January 9, 2013 / 1:06 PM / in 5 years

"Fiscal Cliff" worries depressed small-biz hiring: survey

NEW YORK (Reuters) - At least one in four small- and medium-sized U.S. businesses said they scaled back on investment and hiring in late 2012 due to worries about the “fiscal cliff,” according to a survey released Wednesday.

Nearly one-third of chief executives polled said they had invested less because of concerns about automatic spending cuts and tax hikes that would have gone into effect from January without the last-minute deal that was struck in Washington.

Nearly 30 percent said they had hired fewer people for the same reason, according to the Vistage International quarterly survey of small business executives.

Lawmakers in Washington narrowly avoided the full impact of the cliff, with President Barack Obama signing a deal on January 2 after months of wrangling. But tough decisions about spending cuts still need to be thrashed out.

A fifth of executives in the Vistage survey said they were likely to reduce spending over the next year, the highest level since mid-2009 and up from 15 percent in the previous survey at end of the third quarter.

Slightly more than one-third of respondents said economic uncertainty was the most significant business issue they face, and 11 percent identified political uncertainty.

More than one-third said overall economic conditions in the United States had improved over the last year, compared with 47 percent who said they were “about the same.” More than 40 percent expected the next 12 months to remain about the same, 26 percent foresaw better conditions and 30 percent feared they would be worse.

Vistage’s overall CEO Confidence Index fell for the third straight quarter to 87.0 in the fourth quarter of 2012, down from 89.0 in the previous three months and 98.8 a year ago.

As the U.S. economy gradually recovers, the fiscal fight in Washington remains unfinished. Businesses will be watching negotiations over raising the federal government debt ceiling in the coming weeks, which will revisit spending and taxes.

Nearly two-thirds of executives in the Vistage survey expected sales revenue to increase over the next year, down 10 percentage points from a year ago. Slightly more than one in 10 expected to shed employees. The rest were roughly split between those increasing or maintaining their staff levels.

The survey polled chief executives from 1,601 small and medium-sized U.S. businesses between December 10 and 19. It has a margin of error of 1.6 percentage points.

Reporting by Gabriel Debenedetti; Editing by Richard Chang

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