Canada keeps top spot as most cost competitive mature market for business

KPMG’s Guide to International Business Location Costs (CNW Group/KPMG LLP)

Today, KPMG in Canada released its Competitive Alternatives 2016 report, revealing Canada as the most cost competitive mature market for business.

The high value of the US dollar has enabled Canada to maintain its competitiveness and status in the international rankings, despite higher local business costs such as lease costs for downtown and suburban office space and reductions in federal R&D tax credits. The study, which is conducted biennially, looks at more than 100 cities and 10 countries around the world, examining 26 significant business cost elements, including labour, facilities, transportation, utilities and taxes.

“Over the past year, the weakening Canadian dollar and its potential impacts on the future of our economy have caused concern among Canadians. This study sheds light on a more positive outlook, highlighting that the high value of the US dollar has actually been a driver in improving Canada’s competitiveness and overall cost advantage. While we wait to see where our economy is headed, this study continues to demonstrate Canada’sposition as a cost competitive location for business,” said Greg Wiebe, Partner, KPMG.

Mexico, a NAFTA partner and the only high growth/emerging country included in the study, ranks first overall among the 10 countries in the study, with lower business costs than any of the mature market countries examined.

Among 111 cities featured in the study, 17 were Canadian. Fredericton, NB ranks as the most competitive inCanada, having edged ahead of 2014’s leader, Moncton, NB. The study also reveals that all Canadian cities are more cost competitive than any of the US cities featured; and Montreal, Toronto and Vancouver rank among the most competitive major cities worldwide.

“Each Canadian city included in the study, amongst many others across the country, will benefit from the federal government’s commitment to driving investment in transportation, climate mitigation and social infrastructure. This commitment will continue to make Canada an attractive investment opportunity for organizations and their employees, setting the stage for our competitive future,” said Brad Watson, National Practice Leader, Infrastructure, KPMG.

Among the countries, Canada ranks second (behind only Mexico) in all four sectors examined – digital services, R&D services, corporate services and manufacturing. Among these sectors, Canadademonstrates its strongest results in R&D services, due in part to the federal and provincial R&D tax credits available.

The high value US dollar proved to be a key factor in the rankings for many countries. Canada’s cost advantage relative to third-placed Netherlands only changed marginally, while Canada’s cost advantage over Australia declined due (in part) to the value of the Australian dollar declining by even more than the Canadian dollar relative to the US currency.

From a tax perspective, the UK, Canada and the Netherlands offer the lowest effective rates of corporate income tax across a range of business sectors.

All Canadian cities included in the study were found to be more cost competitive than any of the US cities featured. Among the 34 major Canadian and US cities (all cities with metropolitan populations of 2 million or more), Montreal, QC continues to be the most cost competitive in Canada, followed by Toronto, ON and then Vancouver, BC, ranking ahead of all 31 large US cities.

The rankings of the 17 Canadian cities paint an interesting picture of the costs associated with doing business in Canada:

Fredericton, NB ranks as the most competitive in Canada for the first time, having overtaken 2014’s leader, Moncton, NB. This marks the first time that Fredericton has topped the list of Canadian cities, with low increases in labour costs and reductions in lease costs (especially for industrial) assisting Fredericton’s ranking.

Montreal, QC ranks 9th among the featured Canadian cities and leads in offering the lowest business cost among the 34 largest Canadian and US cities (those with metropolitan populations of 2 million or more). Montreal’s strongest results are in the manufacturing and the digital services sectors, ranking 6th in Canada in both sectors.

Toronto, ON ranks 12th among the 17 featured Canadian cities, but still ranks ahead of all similarly-sized US cities. While low transportation costs and industrial facility leasing costs are advantages for Toronto relative to other Canadian cities, high electricity costs add to Toronto’s total cost picture.

Vancouver, BC ranks 15th among the featured Canadian cities. Within Canada, total labour costs in Vancouver are lower than in the other big Canadian cities, aided by very low costs for statutory plans. However, Vancouver has the highest industrial land costs and the highest office leasing costs among the 17 Canadian cities compared.

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