When it comes to the economy, Brenda Jacob has a laundry list of challenges that don’t seem to be getting easier.
She feels like regulations, fees and costs for health care are all piling up.
Jacob, office manager at Hawkins Machine Co., says that years of laboring to increase the bottom line have become more of a treadmill – lots of work but getting nowhere.
“It’s become too expensive,” she said. “Increases in minimum wage are hurting our ability to hire entry-level people that we need to train.”
When the company cobbles together the capital for hiring and training, what often happens is that once the employee is up to speed, bigger companies such as General Dynamics Electric Boat are waiting in the wings to scoop them up, according to Jacob.
There are plenty of other business executives and owners who are feeling equally glum as they look at the economy now and into the future, according to Providence Business News’ 2026 Winter Business Survey.
Only about 1 out of every 4 respondents – or 26.6% – said their business activity has improved since the previous quarter, an all-time low for a survey that has been conducted twice a year since the summer of 2008.
Meanwhile, nearly the same ratio of companies – 23.4% – expect to see improvements in the state’s economy in the year ahead, the lowest level of optimism in the survey in 18 years.
Quite a difference from the winter of 2017 – at the start of Donald Trump’s first term in the White House – when more than three-quarters of the respondents expected the Rhode Island economy to improve slightly or significantly, and nearly two-thirds had seen more business activity than the previous quarter.
At the same time, less than half the respondents in the latest survey (46.8%) held a positive outlook for their own businesses, projecting that their companies would be doing better a year from now. That’s a rate that’s close to the low of 46.4% in the winter of 2024.
Who can blame businesspeople for feeling squeezed?
Inflation has cooled and interest rate cuts by the Federal Reserve over the last year have lowered borrowing costs, but that’s minor solace to businesses saddled with rising health care and energy costs in an economic environment made uncertain by the Trump administration’s tariff policy.
[caption id="attachment_514997" align="aligncenter" width="1200"]
WRONG DIRECTION: Business activity compared with the last quarter is at an all-time low since PBN began conducting the survey in 2008,
with less than 3 in 10 respondents seeing gains. Companies reporting improved profits remain steady from a year ago.
But expectations for the state economy over the next year are continuing a steady decline, near historical lows set in 2008.[/caption]
Nearly three-quarters of survey takers (71%) said they are paying higher prices now than the previous quarter (down from 73.8% six months ago and down from 75.5% a year ago). Yet 74.2% of the businesses also said they were not planning to raise their own prices in the next quarter, or it was still under review.
Edward M. Mazze, a distinguished professor of business administration at the University of Rhode Island, says the cost hurdles facing businesspeople such as Jacob at Hawkins Machine are not happening in a vacuum. “Many have to compete on the basis of price,” said Mazze, who helped PBN develop the survey in 2008.
The winter 2026 survey “is a lot less optimistic” than most results he’s seen over the years.
“Part of the reason is there are a lot of things happening in the national political environment,” he said. “They have a significant impact on how small and medium-sized businesses view the world. But we are in an economy that really isn’t growing. No one has plans to buy major equipment, hire more workers, or increase in size.”
[caption id="attachment_514996" align="aligncenter" width="1200"]
CUT OUR COSTS: What can state government do for companies? Reduce their business costs, say more respondents. It’s No. 1 by a wide margin
over a host of actions that companies said they’d like to see in the coming year. Nearly 5 in 10 respondents also identify
reducing red tape and providing tax incentives. Calls to eliminate the corporate tax are at their highest level in nine years.[/caption]
Then why stay in the Ocean State?
When asked to rank the greatest benefits of operating in Rhode Island, “proximity to customers” was marked by 71% of respondents on the list, followed by access to university resources (25.8%) and access to transportation (25.8%).
“They are here because most of their customers are here,” Mazze said.
That wasn’t true for one Rhode Island manufacturer that moved much of its operations to the South.
Orbetron LLC has kept its corporate headquarters in Lincoln, but the maker of advanced feeding and blending systems relocated its manufacturing to North Carolina in 2023 to reduce costs and overhead.
North Carolina offers a greater number of vendors that can weld, machine and fabricate the type of products Orbetron makes, according to CEO Roger Hultquist.
In addition, “most of our business is now coming from the Southeast, South, and Midwest region,” Hultquist wrote in the comment section of the PBN survey. “The New England region is only 1% of our business over the last three years, and [we] don’t see this changing any time soon.”
[caption id="attachment_514994" align="aligncenter" width="1200"]
METAL MINDSET: CJ Hawkins, owner of Hawkins Machine Co. in Coventry, works on a component for a client in the electrical industry. CJ Hawkins is the third generation of the family-owned business. Many Rhode Island business owners and executives expressed concerns about the economy in the year ahead.
PBN PHOTO/MICHAEL SALERNO[/caption]
TOUGH TIMES?
The PBN survey is not scientific. PBN sent 21 questions to the newspaper’s database of businesses statewide. Ninety-five returned the survey, a mix of businesses ranging from manufacturers to health care providers, construction contractors to public relations firms. Most were small and midsize companies.
The survey responses were collected from late November to early January. Mazze said that, in some ways, the results show that times may be tough for the typically independent and rugged Rhode Island business class, or at least that’s the perception.
[caption id="attachment_514995" align="aligncenter" width="1200"]
PRESCRIPTION NEEDED: Worry over health care costs is growing, reaching its highest level since PBN began conducting the survey in 2008. More
than 6 in 10 respondents identified it as a top challenge. That easily tops the list of other vexing challenges that includes
a shortage of qualified workers, taxes, and government fees and bureaucracy, which is down slightly from the summer.[/caption]
Less than half of the respondents (47.9%) said their net income in 2025 had improved over the previous year. Meanwhile, a little more than one-third (38.7%) said they were planning to add workers at the start of 2026, down slightly from six months ago and down 8 percentage points from a year ago.
[caption id="attachment_514998" align="aligncenter" width="1200"]
WANING CONFIDENCE: Plans to hire in the next quarter are holding steady from last summer, at their lowest level in six years.
And it’s been five years since fewer companies were planning to purchase big-ticket items.[/caption]
“One of the problems is Rhode Islanders already have a very difficult time celebrating success,” Mazze said. “They are conservative about their outlook on business. But there is not a hell of a lot of excitement.”
There’s never a shortage of obstacles facing Rhode Island businesses, but none more pressing than health care, according to the latest PBN survey responses.
No wonder, with two local hospitals struggling, primary care doctors becoming more scarce as many flee to states with higher Medicaid reimbursement rates, and insurance premiums becoming costlier.
Health care costs ranked as the biggest business challenge among respondents at 64% (up from 57.7% a year ago). At the same time, more than half of respondents (52.7%) said health care has been their biggest growing expense over the last five years (up significantly from 42.5% six months ago and 35.7% a year ago).
Executives at the East Providence branding and marketing agency Advertising Ventures Inc., which does business as (add)ventures, have been watching health insurance premiums grow steadily year after year, but it’s an expense the company can’t avoid because it’s crucial to remaining competitive.
“We had a 14% increase this year, and we were probably on the lower end for Rhode Island businesses,” said Mary Sadlier, (add)ventures president. “Health insurance is an important benefit for both recruiting and retaining talented employees.”
[caption id="attachment_514999" align="aligncenter" width="1200"]
SURVIVAL MODE: Respondent expectations that their own business will improve over the next year is holding steady of just under 50%. While not a historical low, that’s still far below a decade ago when more than 80% had a positive outlook.[/caption]
Still, the survey results are bone chilling to Mazze, who fears that without some sort of government policy change on health care or relief, “a lot of businesses will go out of business,” he said. “It’s scary.”
And the challenges don’t stop with health care.
In the PBN survey, a shortage of qualified workers ranked highly among the greatest challenges facing Rhode Island businesses, named by 50% of those surveyed, although that percentage is down slightly from 52% a year ago.
Meanwhile, a weak economy ranked third on the list of challenges at 47.8% (up from 40.8% six months ago and 39.2% a year ago), and taxes ranked fourth at 44.6% (down from 49.5% six months ago and about level with 44.3% a year ago).
The situation is fueling concerns at companies such as O’Hara Senior Care Services Inc. in East Providence.
[caption id="attachment_515000" align="alignleft" width="450"]
COST SENSITIVE: Brendalee O’Hara, founder of O’Hara Senior Care Services Inc. in East Providence, with a client. O’Hara says Rhode Island is a difficult place for business owners to operate, noting that she’s seeing a lot of her expenses climbing to the point she’s had to increase her fees.
COURTESY O’HARA
SENIOR CARE SERVICES INC.[/caption]
Brendalee O’Hara, who founded the home health care provider company in 2012, says she probably would not have chosen to launch the business in Rhode Island today, calling the state “the worst in the country for business owners.”
O’Hara says she’s seeing increased costs across the board, from rent to energy bills, insurance premiums, and taxes and fees. But she doesn’t blame the macroeconomic factors for the biggest challenges; instead, she points a finger at legislators on Smith Hill.
“The continuing rise in the minimum wage is making our services much more expensive and unaffordable for clients,” she said. “We have had to increase the [charges for] our services.”
So it’s no surprise that reducing the cost of doing business in the state once again topped the list of actions survey takers said the state government could take to support their business – as it has for years – with two-thirds of respondents (68.9%) saying it was important.
Reducing red tape came in second, with support from 49.5%, followed by providing tax incentives at 48.4%.
WAITING FOR SIGNS
Many businesses appear to be in a holding pattern while the economic signals aren’t clear.
Just under 19% of survey takers anticipated purchasing big-ticket items in the next quarter – the lowest level since the depths of the COVID-19 pandemic in 2020 and early 2021.
And with an unsettled federal tariff policy, companies also don’t seem eager to jump into trading overseas, with 77.4% saying they don’t do business with international companies, up from 70.9% six months ago.
Meanwhile, respondents were also asked if their company expected to increase or decrease international business dealings in the next year. While 81.9% said it was under review, only 11.1% said an increase was expected (down from 15.3% a year ago).
Even though few are involved in international business, Mazze says many service firms that depend on individuals who are here on a work permit or illegally are now “in a state of panic when they see what’s happening. And recognizing that the people in Washington tend to go after the Democratic states.”
That, combined with recent talk at the R.I. Statehouse about “affordability,” and the business owners see warning signs that new financial pressures may be coming, according to Mazze.
“You can understand why small businesses are adopting a wait-and-see attitude,” he said.
