Competitive Alternatives 2016, the latest edition of this biennial KPMG series, compares business costs in more than 100 cities in 10 countries, including Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom and the United States.
Competitive Alternatives measures international business costs based on the combined impact of 26 key cost items that vary by location. Current business costs, together with planned future tax changes, are modeled over a 10-year planning horizon, starting in 2016. This study compares 7 distinct business service sector operations and 12 manufacturing sector operations. Overall cost comparisons for each country and city are based on the average results for these two sectors.
National results are based on business costs for major cities in each country. All locations are compared to the US baseline, which reflects average business costs for the four largest US metro areas: New York City, Los Angeles, Chicago and Dallas-Fort Worth.
The surging value of the US dollar in 2015 has greatly impacted the global business landscape, significantly constraining US competitiveness. The high value of the US dollar drives down the cost of doing business in all other countries, when measured in US dollar terms. The US now stands out as a high cost business location relative to its peers, with the cost gap between the US and ninth-ranked Japan being as wide as the range of costs from Japan through to second-ranked Canada.
As a NAFTA member and the only high growth (emerging) country included in the study, Mexico represents the lowest-cost country examined. In 2016, Mexico’s business cost advantage over the US stands at 22.5 percent, higher than at any point in this decade.
Canada maintains its second place rank among the 10 countries, with business costs 14.6 percent below the US. Similarly, the Netherlands retains in third place, with a 12.3 percent cost advantage over the US.
Italy and Australia move up in the rankings this year to fourth and fifth places in the standings, with very similar overall costs.
France ranks sixth and the United Kingdom seventh in the standings, with France moving ahead of the UK and both countries now falling behind Italy in the standings among the European countries.
Germany and Japan rank eighth and ninth, with Germany regaining a lead over Japan as had been seen previously in both 2010 and 2012.
The United States completes the set of countries, in tenth place—the only time the US has ever placed this low in Competitive Alternatives rankings.