Where Costs Are Low

Canada is one of the least-expensive countries in which to do business, partly because the costs of running call centers, data centers, and other back-office operations are among the lowest. But Manchester, England, is the least-expensive European city in which to do business, according to a new study that compares regional business costs.

The study, "Competitive Alternatives: Comparing Business Costs In North America, Europe, And Japan," analyzes labor, taxes, transportation, and 24 other variable business costs in nine countries and 86 cities to determine the most cost-competitive locations for companies looking to expand. The study by consulting firm KPMG LLP establishes cost-index figures, using the United States as a baseline with an average index of 100.0.

Canada, with a cost index of 85.5, is the least-expensive country because it has the lowest corporate taxes and labor costs, the most significant overhead costs in the study. Canada also has the lowest costs for call-center operations, data-processing centers, and other back-office facilities, followed by the United Kingdom and Italy.

Another key factor was telecom costs, which have dropped substantially in recent years thanks to global deregulation. European countries have experienced major drops in telecommunication expenses, falling 65% to 85% since 1999; telecom costs in the U.S. fell around 40%.

Comparing international currencies is another key factor. The euro's value has dropped 24% since its introduction last year. "That's great news if you're a U.S. tourist, but not if you're a U.S.-based company because the cost basis of your exported goods is declining," says Stuart MacKay, co-author of the study and president of MKK Consulting.

The most costly places to do business include New York (No. 2) and San Jose, Calif. (No. 3). But heading the list is the Japanese port city of Yokohama.