World’s most cost-competitive economy is…

Canada is the most cost-competitive mature market for business, finds KPMG’s Competitive Alternatives 2014 report.

Notable decreases in sea freight and natural gas costs, combined with very stable facility costs, limited increases in labour costs, and a 3% drop in the Canadian dollar helped drive its rise in the international rankings. 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.

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

Among 107 cities featured in the study, 15 were Canadian. Moncton ranked as the most competitive city in Canada for the second-consecutive time. The study also revealed that larger Canadian cities are all more cost competitive than comparable large US cities.

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Canada vs. the world

• Canada ranks second (behind only Mexico) among the 10 countries surveyed, with business costs 7.2% lower than the United States.
• A combination of currency exchange rates and cost fundamentals helped move Canada ahead of the Netherlands and the United Kingdom, re-establishing a competitive advantage over these countries seen in 2010 and earlier.
• Canada saw its strongest result in the digital services subsector with a cost advantage of 17.8% relative to the U.S. This significant advantage is due in part to substantial incentives that some Canadian provinces provide to digital media production firms.
• Canada, France, the UK and the Netherlands offer the lowest effective rates of corporate income tax across a range of business sectors, all helped by tax incentives designed to support R&D and/or other high tech activities.

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2014 Rankings for Canadian cities, listed from lowest cost to highest cost

Rank	City	Cost Index
1	Moncton, N.B.	90.1
2	Charlottetown, P.E.I.	90.4
3	Quebec City, Que.	90.7
4	Fredericton, N.B.	90.8
5	Halifax, N.S.	91.6
6	Niagara Region, Ont.	91.9
7	Winnipeg, Man.	92.0
8	Montreal, Que.	92.0
9	Saskatoon, Sask.	92.8
10	Sudbury, Ont.	93.5
11	Toronto, Ont.	93.6
12	Kamloops, B.C.	93.6
13	St. John’s, N.S.	93.7
14	Edmonton, Alta.	94.0
15	Vancouver, B.C.	94.6

¹ Cities represent an intentional mix of population, regional geography, major industries, and economic circumstance. ² Business costs in this table 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. For example, an index number of 95.0 represents a 5.0 per cent cost advantage relative to the US. ³ Niagara Regional Municipality.

2014 rankings for all countries, listed from lowest cost to highest

2014 Rank	Country	2014 Cost Index	% cost advantage versus US
High Growth Market
1	Mexico	81.3	18.7%
Mature Markets
2	Canada	92.8	7.2%
3	Netherlands	94.5	5.5%
4	United Kingdom	94.6	5.4%
5	France	97.4	2.6%
6	Italy	98.8	1.2%
7	Japan	99.2	0.8%
8	Australia	99.3	0.7%
9	United States	100.01	—
10	Germany	100.9	-0.9%

¹ The US baseline of 100.0 reflects costs in the four largest US cities: New York City, Los Angeles, Chicago and Dallas-Fort Worth. National costs for all other countries are also based on major cities in each country.