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KPMG found that all of the developed countries have lost ground relative to the United States in terms of business operating costs, due to the dramatic weakening of the US dollar. 

It is the Netherlands, Italy, Germany, and the United Kingdom that have seen the greatest increases in costs relative to the US, however, according to KPMG's 2008 Competitive Alternatives study that compares business costs in 136 cities in 10 countries in North America, Europe, and Asia Pacific.

Japan one of the most expensive countries

In Europe, the UK has benefited somewhat at the expense of continental Europe from the stronger appreciation that the euro has seen relative to the pound.

France has the lowest cost structure of the European countries, with costs only 3.6 percent above the US benchmark.

Canada and Australia, which in previous years had benefited from a much higher US dollar, now rank second and fourth globally, with business costs essentially equivalent to the US.

Mexico, new to the study, is the cheapest place to do business, with costs approximately 20.5 percent below the US baseline.

Japan remains one of the most expensive countries in which to do business, however, it has gained ground against other countries over the longer term due to low inflation rates and lower volatility of the yen.

Depreciation of the US dollar 

Mark MacDonald, global director of competitive alternatives at KPMG, said that the UK, Netherlands, Italy, and France in previous years all ranked lower than the US benchmark, however, now the cost of business is considerably higher in these countries due largely to the depreciation of the US dollar.

He added that there was strong evidence of intra-regional competitiveness within Europe.

“The opening of labour markets, more competitive tax rates, and investment in infrastructure implies that while Europe has shifted its position relative to the US, there is still strong competition among European countries,” MacDonald explained.

In Europe, costs in Paris are comparable with some large US cities, while costs in Manchester, Frankfurt, and London are all significantly higher than in any of the North American cities studied.

London represents the most expensive city examined, by a wide margin.

Lowest corporate income tax rates 

Toulouse, France-very competitive in aerospace, product testing, and clinical trials-offers the lowest costs among the mid-sized and large cities studied in Europe.

It also offers non-cost benefits related to France's strong environmental performance record, low crime rates, and good access to health care.

Trailing Toulouse is Utrecht, in the Netherlands, which offers the lowest corporate income tax rates for a wide range of operations, as well as excellent access to transportation infrastructure.

Paris ranks third among the mid-sized and large European cities studied.

In North America, among the major cities studied, the Mexican cities of Puebla, Guadalajara, and Monterrey offer the lowest business costs, followed by San Juan, Puerto Rico.

These cities rank ahead of a group of Southern US cities that all offer moderately low business costs: Atlanta, Tampa, and Dallas-Fort Worth. 

At the other end of the spectrum, San Jose, California (Silicon Valley), and New York City continue to represent the most expensive North American cities in which to do business.

Australia relatively affordable

In Asia Pacific, Adelaide has lower costs than Melbourne, Brisbane, or Sydney, in Australia, with all of the Australian cities being relatively affordable compared to their peers elsewhere in the world.

By contrast, in Japan, Yokohama (Metro Tokyo) has the third-highest cost structure among the major international cities studied, ahead of only Frankfurt and London.

This year, the study measured 27 significant cost components that are most likely to vary by location, including labour, taxes, real estate, and utilities, as they are applied to 17 business operations, over a 10-year planning horizon.

The study also compared data on a variety of non-cost competiveness factors.

The six month research programme covered 136 cities in Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, the United Kingdom, and the United States.