UK is fourth most competitive international location for business
A bi-annual study of the business competitiveness of over 100 cities in 10 countries around the world by KPMG has found that the UK is one of the most attractive countries to do business. The report also considered the competitiveness of each country by four industry sectors – digital services, research and development (R&D), corporate services and manufacturing – and found that the UK is the second most competitive country for corporate services; third for digital services and fourth for R&D and manufacturing.
The report examined ten countries – the G7 of Canada, France, Germany, Italy, Japan, UK, US – plus Australia, Mexico and the Netherlands and considered both the costs of doing business plus a range of competitiveness issues such as education and skilled labour; innovation; infrastructure; economic conditions; the regulatory environment and cost of living in drawing its conclusions.
Simon Collins, UK chairman of KPMG, commented: “There is no doubt that the UK is in a hotly contested international competition for global investment. The decisions international businesses make when they locate have an important economic impact on the countries they operate in and can have a powerful social impact. Recent news from Siemens that they plan to double investment in a new offshore wind technology manufacturing plant in Hull, creating jobs, is one such example.
“The UK has it all; competitive costs and tax and unrivalled innovation, all wrapped up in a place where people want to live. Siemens and others show the world that the UK will win the battle for global investment.”
The UK’s tax regime is a crucial factor for international enterprises as they make important funding and operational decisions.
Chris continued: “When looking at effective corporation tax rates the UK is ranked first for manufacturing and corporate services. This shows the importance of maintaining a competitive tax system and the position will improve with the rate falling to 21% and then 20% next year. The attractiveness of a country’s tax regime should not be under-estimated. Our research also shows that tax typically represents up to 14% of location-sensitive costs; an important reminder to policy-makers.”
The UK saw a very marginal increase in costs of 0.1% since the 2012 study, which meant it swapped places with the Netherlands (which was fourth in 2012) but the costs between the two countries are virtually identical. At a global level, Mexico ranked first of the 10 countries studied and had the lowest business costs. Mexico’s 18.7% cost advantage over the US in 2014 is similar to when the research was conducted in 2010, with little change in the value of the Mexican peso over this four year period, Mexico’s cost advantage relative to its northern neighbour has proved resilient.
Overall, the report found that the costs of doing business across the ten countries studied have only increased marginally since the report was conducted in 2012 at just 1.2%. Low inflation and low interest rates have been the most influential factors in keeping costs down. Indeed, only France has seen an increase in costs of more than 2% since 2012.
– Labour costs represent the single largest location-sensitive factor;
– Facility costs vary both by location and type of business operation;
– Transportation costs vary widely by industry;
– Utility costs represent up to 8% of total location-sensitive costs.
– Tax typically represents up to 14% of location-sensitive costs with effective corporate income tax rates, calculated net of generally applicable tax credits and incentives varying by sector:
– For digital services operations, Canada, the UK and France offer the lowest corporate effective tax rates (“ETR”s).
– For research and development operations, the UK is not amongst the lowest three corporate – ETRs which are held by France, the Netherlands and Canada.
– For corporate services, the UK, Canada and the Netherlands offer the lowest corporate ETRs.
– For manufacturing operation, the UK, Canada and the Netherlands again offer the lowest corporate ETRs.
– Property based taxes represent the other major category of taxes that are widely applied across all study areas. These are lowest in Mexico, the Netherlands and Australia.