Ontario Improves Business Cost Advantages 

The slight easing in the Canada-US exchange rate over the last 2 years has helped the competitiveness of Canadian cities, and federal tax cuts have assisted the cost competitiveness of Canada for global business. In addition, tax reforms being phased in by Ontario, including the switch to the HST, are providing further benefits to businesses in the province.

Competitive Alternatives examines business competitiveness in 112 cities in Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom, and the United States. The study measures 26 significant cost components that are most likely to vary by location, including labour, taxes, real estate, and utilities, as they apply to 17 business operations over a 10-year planning horizon, as well as a range of non-cost competitiveness factors.
The Ontario cities ranking in the top 20 are Peterborough (15th), Belleville (16th), and Chatham-Kent (20th), all with business costs 6 percent or more below the US baseline. Ontario’s trade-oriented border cities also fare well in the study, with St. Catharines-Niagara holding a cost advantage of 1.8 percentage points over Buffalo, NY, and Windsor offering a 4 percent business cost advantage over Detroit.

Comparing business costs in Toronto to other major global cities, Competitive Alternatives 2010 ranksToronto sixth among a group of 41 large international cities, all with populations in excess of 2 million. This represents an improvement for Toronto, up from a ranking of 14th (in 2008) among a similar group of 35 cities. For Canada’s other major cities, Montréal ranks third and Vancouver fifth. Looking south, Atlanta ranks eighth, Philadelphia 19th, Detroit 20th, Boston 31st, and New York City 37th. In Europe, London ranks 36th and Frankfurt 38th.

The results were determined using recent exchange rates with the Canadian dollar valued at USD$0.943 (CAD$1.06 per USD$), down from parity in 2008. "Cities in Ontario offer businesses a variety of cost and non-cost advantages—low operating costs, competitive corporate tax rates, high quality of life, excellent access to health care at a low cost to corporations, and high-quality education," said Simon Harding, Associate Partner in KPMG’s Advisory Services practice and head of its Canadian Strategic & Commercial Intelligence practice. "Even with the high Canadian dollar, Ontario cities still hold a strong competitive edge over their US and European counterparts."

In addition to business costs, Competitive Alternatives 2010 also compares a wide range of other factors that impact on the competitiveness of locations to business. “One area where Ontario really stands out is in its affordability of housing. Even in Toronto, which, of course, is the most expensive housing market in the province, housing affordability is quite reasonable by international standards,” said Glenn Mair, Director, MMK Consulting, and one of the study authors in association with KPMG. “Housing in Toronto is much more affordable than in Vancouver, and is lower than many international cities, including Boston, Los Angeles, Miami, New York, London, and Sydney.”

Comparison of Cost Indices among Featured Canadian Cities

Ranks shown in this table are among this group of 15 Canadian cities featured in both the 2008 and 2010 editions of Competitive Alternatives. Business costs are expressed as an index, with the United States being assigned the baseline index of 100.0. A cost index less than 100 indicates lower costs than the US. A cost index greater than 100 indicates higher costs than the US. For example, an index number of 95.0 represents a 5.0 percent cost advantage relative to the US. (Source: Competitive Alternatives 2010, KPMG)

Canada and the International Comparison

• Mexico ranks first among the countries studied, with business costs 18.2 percent lower than in the United States. This rating reflects Mexico's status as the only emerging industrial country included in Competitive Alternatives 2010.
• Canada and the Netherlands are the cost leaders among the nine established industrialized countries examined, with business costs 5.0 and 3.5 percent below the US, respectively.
• Australia, the United Kingdom, and France rank fourth, fifth, and sixth, respectively. Costs in Australia are 2.2 percent below the US baseline, while costs in the UK and France are very closely matched, at 1.8 and 1.7 percent below the US, respectively.
• Costs in Italy are virtually equivalent to the study baseline—the United States.
• Germany and Japan have the highest cost structures among the 10 countries examined, with costs 2.5 and 7.4 percent (respectively) higher than the US.

Cost Competitiveness: 2010 and 2008 Rankings by Country

Business costs are expressed as an index, with the United States being assigned the baseline index of 100.0. A cost index less than 100 indicates lower costs than the US. A cost index greater than 100 indicates higher costs than the US. For example, an index number of 95.0 represents a 5.0 percent cost advantage relative to the United States.

(Source: Competitive Alternatives 2010, KPMG.)

Rankings for most countries are generally consistent between 2008 and 2010. The two exceptions are the Netherlands, which has seen a relative improvement in its ranking, and the United States, which has seen a relative decline. These changes are due in part to the shift in study focus for the 2010 edition of Competitive Alternatives, to base the national comparisons on business costs for the largest cities in each country, rather than the mix of different sized cities compared in previous editions. This change has improved the national relative ranking of the Netherlands, due to its relatively homogeneous nation-wide cost structures, while worsening the relative ranking of the United States, which sees much greater variation in costs between its largest cities and smaller regional ones.

About Competitive Alternatives

KPMG's 2010 Competitive Alternatives study provides an independent comparison of international business location costs in 112 cities in 10 countries around the world. The study enables businesses executives to take a quick initial scan of how business costs compare among a variety of cities in leading countries. It also assists KPMG professionals and economic developers in their work with businesses considering relocation, and enables policy makers to help determine the impact of a proposed tax and/or incentive policy change on the cost competitiveness of their jurisdictions.

To access the full report, please visit www.competitivealternatives.com.

The full ranking of 41 major international cities referenced in this press release is available at www.competitivealternatives.com/new/cities.aspx.
Exchange rates per USD used in the Competitive Alternatives 2010 study are as follows: AUD $1.10, CAD $1.06, €0.68, GBP £0.61, JPY ¥89.86, and MXP $13.07.

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