A bi-annual study of the business competitiveness of over 100 cities in 10 countries around the world by KPMG has found that the UK is one of the most attractive countries to do business. The report also considered the competitiveness of each country by four industry sectors – digital services, research and development (R&D), corporate services and manufacturing – and found that the UK is the second most competitive country for corporate services; third for digital services and fourth for R&D and manufacturing.
The report examined ten countries – the G7 of Canada, France, Germany, Italy, Japan, UK, US – plus Australia, Mexico and the Netherlands and considered both the costs of doing business plus a range of competitiveness issues such as education and skilled labour; innovation; infrastructure; economic conditions; the regulatory environment and cost of living in drawing its conclusions.
Simon Collins, UK Chairman of KPMG, commented: “There is no doubt that the UK is in a hotly contested international competition for global investment. The decisions international businesses make when they locate have an important economic impact on the countries they operate in and can have a powerful social impact. Recent news from Siemens that they plan to double investment in a new offshore wind technology manufacturing plant in Hull, creating jobs, is one such example.
“The UK has it all; competitive costs and tax and unrivalled innovation, all wrapped up in a place where people want to live. Siemens and others show the world that the UK will win the battle for global investment.”
The UK’s tax regime is a crucial factor for international enterprises as they make important funding and operational decisions.
Chris Morgan, UK Head of Tax Policy at KPMG, went on to say: “When looking at effective corporation tax rates the UK is ranked first for manufacturing and corporate services. This shows the importance of maintaining a competitive tax system and the position will improve with the rate falling to 21% and then 20% next year. The attractiveness of a country’s tax regime should not be under-estimated. Our research also shows that tax typically represents up to 14 percent of location-sensitive costs; an important reminder to policy-makers.”
The UK saw a very marginal increase in costs of 0.1 percent since the 2012 study, which meant it swapped places with the Netherlands (which was fourth in 2012) but the costs between the two countries are virtually identical. At a global level, Mexico ranked first of the 10 countries studied and had the lowest business costs. Mexico’s 18.7 percent cost advantage over the US in 2014 is similar to when the research was conducted in 2010, with little change in the value of the Mexican peso over this four year period, Mexico’s cost advantage relative to its northern neighbour has proved resilient.
Overall, the report found that the costs of doing business across the ten countries studied have only increased marginally since the report was conducted in 2012 at just 1.2 percent. Low inflation and low interest rates have been the most influential factors in keeping costs down. Indeed, only France has seen an increase in costs of more than 2 percent since 2012.
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Emily Hartman, Ellie Fixter, Louisa Feltes, FTI Consulting
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KPMG Press Office: +44 (0) 207 694 8773
About the research
The study provides an independent comparison of international business locations in more than 100 cities in 10 countries around the world. The study measures the combined impact of 26 significant cost components that vary by location, over a 10-year analysis horizon (starting in 2014). The study also compares 19 different business operations – seven services operations (such as biotech R&D, software design, video game production, international financial services, and corporate support services) and 12 manufacturing operations (such as advanced batteries/fuel cells, aircraft parts, auto parts, food processing, specialty chemicals, pharmaceutical products etc.). Operations are chosen to reflect many of the types of businesses making location decisions across multiple jurisdictions. The study does not include industries where the business location is driven by resources (e.g. mining, forestry) or customer interface (e.g. retail, hospitality, professional services).
Business costs are expressed as an index using the US as the baseline of 100.0. A cost index less than 100.0 indicates lower costs than the US, and a cost index greater than 100.0 indicates higher costs than the United States. For example, a cost index of 95.0 represents a 5.0 percent cost advantage relative to the United States. To determine the US baseline the four largest US metro areas were used – New York City, Los Angeles, Chicago and Dallas Fort Worth. These large cities were used for the US baseline, because the international comparisons are all based on business costs in major cities in each country. This creates an apples-to-apples comparison for the national results.
For a full list of industries included in the study: http://www.competitivealternatives.com/
For a full methodology, download the study report: http://www.competitivealternatives.com/
KPMG LLP, a UK limited liability partnership, is a subsidiary of KPMG Europe LLP and operates from 22 offices across the UK with approximately 11,500 partners and staff. The UK firm recorded a turnover of £1.8 billion in the year ended September 2013. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 155,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.