France, Holland and Italy ahead of UK as low cost destinations

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The UK is being overtaken by its European rivals as a low cost destination for business according to a comprehensive global study carried out by KPMG.

The 2006 Competitive Alternatives report, found that the UK had fallen from 3rd position in 2004 to 6th place this year, having been overtaken by France, Italy and the Netherlands. However, the UK remains ahead of the US, Japan and Germany. Singapore is the most cost-competitive place to do business among nine industrialized countries studied.

KPMG’s bi-annual Competitive Alternatives study measures 27 key cost components—including labour, business facilities, taxes and utilities and includes a comprehensive analysis of 128 cities in nine countries — Canada, France, Germany, Italy, Japan, the Netherlands, Singapore, the United Kingdom and the United States. The study’s basis for comparison is the after-tax cost of start-up and operation for 17 different types of business, over a 10-year planning horizon.

Ian Barlow, London Senior Partner at KPMG LLP says :

“Whilst these results are disappointing at one level I think that what we are really seeing here is the price that the UK is paying for having a successful economy.  Low unemployment rates, higher labour costs and a strong pound have increased the market cost of our skilled labour over our competitors who do not have all of these benefits.”

According to the study, labour costs typically represent the majority of location-sensitive costs, for both manufacturing and non-manufacturing operations. France and Italy had the lowest wage costs in Europe, whilst Germany had the highest costs.   Salaries in the UK were found to be higher than the US at junior levels, but lower at senior levels.

More details can be found on the KPMG website here

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