KPMG’s Competitive Alternatives 2014 : The more things change, the more they stay the same

March 28, 2014

New international ranking but same result. Greater Montréal continues to perform—and even outrank its global rivals—this time in respect to international operating costs. KPMG’s 2014 edition of the Competitive Alternatives study confirms Montréal’s top position among 34 metropolises in North America (excluding Mexico) with populations of over two million people. The region even markedly improved its overall cost advantage between 2012 and 2014, compared to the U.S. average, having jumped from 5.7% to 8.0%!

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Today, the overall operating costs of a company in Montréal represent 92.0% of the U.S. average, in first place and ahead of Toronto and Vancouver (93.6% and 94.6% respectively). The finding is the same when we break down the study into each of the four sectors analyzed: Greater Montréal literally dominates the North American ranking! These results alone are most impressive. That’s just tip of the iceberg; Greater Montréal ranks second among cities with populations of at least two million people in OECD nations in the study, just behind Manchester, United Kingdom. Greater Montréal continues to build on a solid reputation as the preferred city to set up and operate a business.

Current exchange rates obviously have an impact on the country rankings. The weakening loonie has kept Canada in second place among the 10 countries in the study. However, in an ever increasingly competitive world where the gap between cities is constantly shrinking, incentives offered to business—such as various tax credits and tax holidays—make all the difference. The weighting of cost factors, such as energy costs, industrial rent costs and wages, is generally lower in Montréal than elsewhere, which helps businesses cut down on operating costs.

In short, Greater Montréal’s cost advantage varies significantly from sector to sector, which is due in large part to a targeted tax assistance strategy that enables the metropolitan region to stand out from other cities in some key sectors. For example, thanks to competitive tax credits in the video game, software design, R&D and international financial services sectors, it costs a lot less for a business to set up in Greater Montréal. The region is also the most competitive when it comes to the manufacturing sector, although the gap is narrower, specifically in the aircraft parts, medical equipment and pharmaceutical sectors.

Montréal needs to continue enhancing its attractiveness to keep standing out from its competition. Admittedly, the metropolis does very well when it comes to operating costs and is a prime location for businesses to set up—at least in this corner of the world.

Methodology: The study compares start-up and operating costs, after taxes, over a-10-year period for 131 cities in 10 countries. The index developed by KPMG is based on 26 cost factors, comprising mainly of labour costs, income taxes, transportation costs, energy costs, telecommunications costs, utility costs and facility costs. A country’s cost advantage is based on the average costs in the largest cities in each country.

Philippe Valentine, Analyst
Economic Research Division

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