Competitive Alternatives Backgrounder

Transcription

1 Competitive Alternatives Backgrounder The Competitive Alternatives study compares business costs and other competitiveness factors in more than 100 cities, in 10 countries. The study is to help Canadian and international businesses make informed global business decisions and assist economic developers and corporate site selectors in understanding these competitiveness issues across a broad range of jurisdictions. Included below is a breakdown of the main study findings for Canada and the top ranking 15 Canadian cities. To speak with a KPMG spokesperson about the 2014 Competitive Alternatives study, please contact: [email protected]. Canada The study revealed Canada as the most cost competitive mature market country for business. The study also revealed that larger Canadian cities are all more cost competitive than comparable large US cities. Notable decreases in sea freight and natural gas costs, combined with very stable facility costs, limited increases in labour costs, and a three percent drop in the Canadian dollar helped drive Canada s top ranking. Canada ranks second among the 10 countries in the digital services subsector with a cost advantage of 17.8 percent relative to the US baseline its strongest result among the business sectors studied. From a tax perspective, 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. Moncton Moncton ranks as the most competitive city in Canada for the second consecutive time. Moncton ranks 4th among all 107 featured cities, behind only the two Mexican cities studied and Manchester (UK). Moncton ranks ahead of (lower costs than) all six US cities examined in the neighbouring New England region. Moncton ranks 2nd among the 15 featured Canadian cities for low labour costs and 3rd for low industrial facility lease costs, representing advantages for Moncton against most of its Canadian peers. However, industrial facility costs in Canada are generally higher than in the US, and among all cities compared Moncton s costs are close to average for this cost factor. In 2012, low taxes were identified as another asset for Moncton, both relative to other Canadian cities and internationally. With New Brunswick increasing its corporate income tax rate in 2013 (reversing an earlier tax cut), Moncton s tax costs are now above average relative to other Canadian cities, but still competitive globally. Moncton s strongest results are in both the R&D and manufacturing sectors, where it ranks 1st (lowest cost) among the Canadian cities. In comparison, Moncton ranks 2nd in both digital services (behind Quebec City) and corporate services (behind Charlottetown). Competitive Alternatives 2014

2 Within the manufacturing sector, pharmaceuticals, specialty chemicals and telecom equipment are among the specific industries where Moncton ranks 1st in Canada. Charlottetown Ranks 2nd among the 15 featured Canadian cities and 5th among all 107 featured cities. Among the 89 featured cities in Canada and the United States, Charlottetown has the lowest wage/salary costs and, including all statutory and benefits costs, the lowest total labour costs. Office leasing costs represent another advantage for Charlottetown, the lowest among the 15 featured Canadian cities and 6th lowest among 107 international cities. Low property tax costs help Charlottetown ranking 2nd in Canada (behind Saskatoon) for low property-based taxes. PEI s transition from retail sales tax to HST in 2013 also helped lower Charlottetown s tax costs and improve its ranking among the Canadian cities in the current study. Charlottetown s transportation costs are above average, relative to both other Canadian cities and internationally. In addition, Charlottetown s utility costs are the highest among the featured Canadian cities. Charlottetown s strongest results are in the corporate services subsector, where it ranks 1st (lowest cost) among the Canadian cities for both professional services and support services operations. Quebec City Ranks 3rd among the 15 featured Canadian cities and 6th among all 107 featured cities. More competitive leasing rates for both industrial and office space are the main factors specific to Quebec City that helped it to move up in the rankings among the Canadian cities, from 6th in 2012 to 3rd in In addition, relatively low surface freight transportation costs (4th lowest among 15 featured Canadian cities) help to improve Quebec City s performance for manufacturing operations. Provincial tax incentives, including for manufacturing equipment, e-commerce (IT), digital media production, and R&D wages help to lower Quebec City s effective corporate income tax rate for many different business operations, resulting in Quebec City having the 4th lowest effective tax rate among all 107 study cities. The digital services subsector is where Quebec City sees its strongest result, with moderately low costs across all cost factors resulting in Quebec City ranking 1st among the 15 featured Canadian cities. Within this subsector, Quebec City ranks 1st among Canadian cities for software development, and 3rd for video game production. For manufacturing, Quebec City ranks 1st among the Canadian cities for precision components manufacturing, and 2nd for several industries including food processing, metal components, and plastic products. Fredericton Ranks 4th among the 15 featured Canadian cities and 7th among all 107 featured cities. Within Canada, Fredericton ranks 3rd in terms of both wage/salary costs and also total labour costs (including all statutory and benefit costs). The corporate services and R&D subsectors are where Fredericton sees its strongest results, ranking 3rd among the 15 Canadian cities in both of these subsectors. Within the manufacturing sector, Fredericton achieves its best result for specialty chemicals manufacturing, ranking 2nd among the Canadian cities. Competitive Alternatives 2014 pg 2

3 Halifax Ranks 5th among the 15 featured Canadian cities and 8th among all 107 featured cities. Within Canada, Halifax ranks 4th in terms of total labour costs. For transportation costs, Halifax ranks 6th among the 15 Canadian cities. Sea freight rates out of Halifax are less favourable now than in 2012, causing Halifax rank for transport costs to drop in Together with higher utility rates, these factors account for Halifax dropping from 3rd among the Canadian cities in 2012 to 5th in Partly offsetting these declines, Halifax has improved its position for property tax costs in The corporate services subsector is where Halifax sees its strongest result, ranking 4th among the 15 Canadian cities in this subsector. Within the manufacturing sector, Halifax achieves its best result for aircraft parts manufacturing, ranking 3rd among the Canadian cities. Niagara Region (Niagara Regional Municipality) Ranks 6th among the 15 featured Canadian cities and 9th among all 107 featured cities. Niagara Region has the lowest facility costs among the 15 Canadian cities, including the lowest industrial leasing costs and the second lowest office leasing costs. Moderately low transportation costs (3rd in Canada) and natural gas costs (4th in Canada) also help Niagara Region s total cost ranking. Niagara Region sees its best results in digital services, ranking 4th in Canada. Within this subsector, Niagara ranks 1st among the Canadian cities for video game production helped by Ontario s Interactive Digital Media Tax Credit and helping support the small digital media production cluster that is developing in the Region. Winnipeg Ranks 7th among the 15 featured Canadian cities, and 10th among all 107 featured cities. Winnipeg s electricity costs are the lowest in Canada, and its natural gas costs are the second lowest among the 15 Canadian cities compared. Moderate wage levels, low costs for employer-paid benefits, and moderate facility leasing costs also help Winnipeg s overall cost position. More competitive facility lease costs are the main factor that help Winnipeg move up from 8th place in 2012 to 7th place in 2014, nudging ahead of Montreal. Winnipeg s strongest results are for R&D, where it ranks 4th among the 15 featured Canadian cities, with the lowest costs of any city west of the Maritimes. Within the manufacturing sector, specialty chemicals (4th) and aircraft parts (5th) are two industries where Winnipeg betters its overall ranking of 7th. Looking north-south, Winnipeg has the lowest business costs among all 26 cities examined in the Midwest US/Western Canada region, finishing ahead of Saskatoon, Cedar Rapids (IA), Edmonton and Omaha (NE). Montreal Ranks 8th among the 15 featured Canadian cities and 11th among all 107 featured cities. Montreal offers the lowest business costs among the 34 largest Canadian and US cities (representing all the metro areas that have populations of two million or more). Competitive Alternatives 2014 pg 3

4 Compared to 2012, Montreal has slipped from 7th to 8th place among the Canadian cities compared. This change in rank is attributable to improved results for Winnipeg (now 7th), rather than a deterioration for Montreal. Relative to other Canadian cities, low transportation costs, and moderately low industrial leasing costs and electricity costs help Montreal s performance. The range of tax incentives available in Montreal are also an important advantage for many activities including R&D, e-commerce (IT), digital media production, international financial activities, and manufacturing. This results in Montreal having the 2nd lowest effective corporate income tax rate among all 107 featured cities. Relative to other Canadian cities, Montreal s strongest results are in digital services (3rd among Canadian cities) and manufacturing (5th among Canadian cities). Within manufacturing, in the advanced batteries, food processing and plastic products industries, Montreal ranks as having the lowest costs among all 15 Canadian cities. Saskatoon Ranks 9th among the 15 featured Canadian cities, and 13th among all 107 featured cities. Saskatoon s ranking in 2014 is consistent with 2012 recording business costs that are higher than Winnipeg but lower than Toronto or Edmonton. Low benefit costs both for statutory plans and other employer-paid benefits, together with relatively low utility costs for electricity and natural gas, and low property tax costs all help Saskatoon s total cost position. High facility costs, both for office leasing (2nd highest in Canada) and industrial leasing (4th highest in Canada), add to total costs in Saskatoon, as do high transportation costs. Saskatoon s strongest results are for corporate services and digital services, ranking 9th among the 15 featured Canadian cities in both of these subsectors. Within the digital subsector, Saskatoon ranks 6th among the Canadian cities for software development. Within the manufacturing sector, specialty chemicals (3rd) and telecom equipment (7th) are the industries where Saskatoon achieves its best rankings and beats its overall 9th place ranking. Looking north-south, Saskatoon has the 2nd lowest business costs among 26 cities examined in the Midwest US/Western Canada, ranking behind Winnipeg, but edging out Cedar Rapids (IA), Edmonton and Omaha (NE). Sudbury Ranks 10th among the 15 featured Canadian cities and 14th among all 107 featured cities. Within Canada, Sudbury has low office leasing costs 3rd lowest among the 15 Canadian cities. Below-average natural gas costs represent another advantage for Sudbury. Relatively high property tax costs, employer-paid benefits costs, electricity costs, and factory leasing costs all add to Sudbury s total cost picture. Sudbury sees better results in the services sector (ranking 8th) than in manufacturing (14th). Among the 15 Canadian cities, Sudbury ranks 5th for digital services and 9th for R&D services besting its 10th place overall rank in these two subsectors. Toronto Ranks 11th among the 15 featured Canadian cities, 15th among all 107 featured cities. Toronto has the second-lowest business costs among the 34 largest Canadian and US cities (all metro areas with populations of 2 million or more), behind only Montreal. Competitive Alternatives 2014 pg 4

5 Compared to 2012, Toronto moved up from 12th to 11th place among the Canadian cities, ahead of St. John s (NL). This change in rank is partly due to more competitive transportation costs for Toronto in 2014, but also partly due to cost increases in St. John s. Relative to other Canadian cities, low industrial leasing costs (ample supply of available facilities), low transportation costs (for road, sea and air) and relatively low natural gas costs represent advantages for Toronto. At the other end of the spectrum, Toronto has the highest total labour costs and the second highest electricity costs among the 15 featured Canadian cities. Toronto s strongest results are in the manufacturing sector, ranking 8th among Canadian cities. Within this sector, Toronto ranks 4th among the Canadian cities for both advanced battery systems and food processing. Toronto also performs well in digital services, ranking 10th among Canadian cities. Within this subsector, Toronto stands out for video game production, ranking 4th among the Canadian cities, ahead of Montreal (5th). Ontario s Interactive Digital Media Tax Credit substantially enhances Toronto s performance in this industry. For international financial services, Toronto s costs rank 15th, representing the most expensive city in Canada. However, compared to other global financial centers, Toronto s ranking of 28th among 107 cities places it ahead of Sydney (86th), Chicago (98th), Frankfurt (99th), Tokyo (104th), London (106th), and New York (107th). Kamloops Ranks 12th among the 15 featured Canadian cities and 17th among all 107 featured cities. Kamloops has the 2nd lowest electricity costs, 3rd lowest statutory plan costs for labour, and 4th lowest office leasing costs among the 15 Canadian cities. Relatively high factory leasing, transportation, and salary/wage costs all add to Kamloops total cost picture. Kamloops sees its best results in the corporate services subsector, ranking 6th in Canada. Within manufacturing, Kamloops achieves its best ranking in food processing, at 9th among the 15 Canadian cities. St. John s Ranks 13th among the 15 featured Canadian cities and 18th among all 107 featured cities. Within Canada, St. John s has average labour costs, but higher than in the past. In 2012, St. John s ranked 3rd among Canadian cities for salary/wage costs and 5th for total labour costs. By 2014, St. John s ranks 7th on both these measures. High facility and transportation costs also add to St. John s total cost picture. R&D and corporate services are where St. John s sees its strongest results, ranking 7th and 8th, respectively, among the 15 Canadian cities in these two subsectors. Edmonton Ranks 14th among the 15 featured Canadian cities, and 22nd among all 107 featured cities. Edmonton s ranking in 2014 is consistent with 2012 recording business costs that are higher than Toronto but lower than Vancouver. Wage/salary costs in Edmonton are higher than in most Canadian cities (13th among the 15 Canadian cities), although very low statutory plan costs help somewhat to moderate Edmonton s total labour costs. High office leasing costs, especially for suburban office space, also add to Edmonton s total cost picture. Edmonton offers the lowest natural gas costs among the Canadian cities, and having the 3rd lowest property tax costs among the 15 Canadian cities also helps Edmonton. Competitive Alternatives 2014 pg 5

6 Edmonton s best results are for manufacturing, ranking 11th, and R&D, ranking 13th among the 15 Canadian cities. Edmonton s rankings for digital services and corporate services mirror its overall ranking in Canada 14th. Within manufacturing, Edmonton s relatively stronger results are in food processing and specialty chemicals. Looking north-south, Edmonton ranks 4th among the 26 cities examined in the Midwest US/Western Canada region, ranking ahead of Omaha, Dallas-Ft Worth, Houston, and Minneapolis (among others). Vancouver Ranks 15th (most expensive) among the 15 Canadian cities featured in While this may appear to represent a drop from 2012 when Vancouver ranked 14th among 16 cities, changes in the group of featured cities prevent such a comparison to Vancouver s relative results compared to Edmonton and Toronto are very similar in both 2012 and Vancouver ranks 33rd among all 107 featured cities. Vancouver has the third-lowest business costs among the 34 largest Canadian and US cities (all metro areas with populations of 2 million or more), marginally ahead of Atlanta (the lowest-cost large US city). Costs on the US West Coast are also generally higher than in many other regions of the US, and Vancouver ranks ahead of its US West Coast competitors: Seattle, Portland, San Francisco, Los Angeles, and San Diego. Overall wage/salary costs in Vancouver are higher than in the other Canadian cities, although very low costs for statutory plans and moderate costs for other employer-paid benefits mean that total labour costs in Vancouver are lower than in Toronto. Relatively high facility leasing costs are also an issue for Vancouver. Low utility costs represent an advantage for Vancouver, with the 2nd lowest electricity and the 3rd lowest total utility costs among the 15 Canadian cities. Vancouver s strongest results are in the manufacturing sector for industries with significant export orientation, thanks to the global access provided by Canada s largest port. Vancouver also fares well for international financial services, ranking ahead of Toronto in this industry that is a source of strong competition between the two cities. Compared as a percentage of payroll. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Competitive Alternatives 2014 pg 6