Winnipeg has competitive business cost advantage

March 28, 2008
Winnipeg Free Press
Written by: Larry Kusch

Winnipeg has the second-lowest business costs in Western Canada and holds a competitive advantage over most midwestern North American cities, despite the high loonie, according to a study released Thursday.

Canada's once large advantage in competitiveness over the United States has all but disappeared with the recent dramatic rise in value of the Canadian dollar, KPMG said in its seventh biennial Competitive Alternatives study.

Canada finished still first among the nine established industrialized countries in the study, barely ahead of the United States, which placed second, and third-place Australia, but trailed far behind Mexico, which was included in the report for the first time to provide a snapshot of competition among NAFTA partners.

Winnipeg was ranked behind only Saskatoon as the least costly place in Western Canada to do business, while making significant gains on Calgary, Edmonton and Vancouver, which all saw their costs rise faster since the last report in 2006.

"You've got a good news story to tell both this year and (in) the trend over the last few editions (of the study)," said KPMG's Mark MacDonald, referring to Winnipeg, in an interview.

"You've gained a five-pe-cent cost advantage in the last six years relative to Calgary, and that's fairly significant," he said.

The study measured 27 significant cost components, including labour, taxes, real estate and utilities as they are applied to 17 business operations.

Average U.S. costs were used as the benchmark (100) in assigning a numerical rating to all 10 countries and 136 cities in the report, as well as to individual industries.

Winnipeg, with a cost index of 97.7, had a better rating than the U.S. average, while Calgary (102.0) fell behind.

Two years ago, before the loonie took off, Winnipeg's cost index was 94.1, while Calgary's stood at 94.7. But the Alberta energy boom has boosted costs in Calgary, which is now the second most expensive Canadian city, next to Vancouver (104.2) in which to conduct business.

Stuart Duncan, CEO of Destination Winnipeg, the city's economic and tourism promotion agency, noted that the city was more competitive than the American average in 12 of the 17 industries studied.
Winnipeg also finished third among cities of at least 500,000 in population in a broad midwestern North American corridor extending south to Texas, he said.
Winnipeg's aerospace (96.8), software design (91.3), Web and multimedia (94.5), biotechnology (94.7), clinical trials (92.2) and electronic systems development and testing (90.8) sectors are performing particularly well compared with American competitors, the study said.

The average rating for the city's manufacturing sector stood at 99.2 -- slightly better than the American average despite being squeezed by a muscular loonie.

"That's pretty satisfying," said Gordon Greaves with the Manitoba division of the Canadian Manufacturers and Exporters. "We think we're a pretty good place to do business."

Greaves said city manufacturers have adopted lean practices -- eliminating waste from start to finish in the manufacturing process -- while boosting investments in training and technology to improve productivity. Federal tax changes, matched by the province, allowing for accelerated depreciation on new equipment, have also helped, he said.

Canada's overall cost index, which was as low as 85.5 per cent of the U.S. level in 2002, stands at 99.4 per cent. Mexico's cost index, by contract, is pegged at 79.5 per cent of the American mark.

Six years ago, Winnipeg's business costs were 86.4 per cent of the American average, ranking fourth in the midwest North American region behind Edmonton (82.9), Saskatoon (84.9) and Calgary (85.0).

This year's study also compared data on a variety of non-cost competitiveness factors that influence the attractiveness of establishing a business in a particular community. Canada ranked high in environmental performance, quality of life, educational attainment and ethical business practices.

larry.kusch@freepress.mb.ca

How we stack up

Business cost indexes in major well-off countries and Mexico, according to global consultancy KPMG, with the average U.S. level representing 100. (Ranking in previous study two years ago is bracketed):

1. Mexico 79.5 (not ranked)
2. Canada 99.4 (2)
3. United States 100 (7)
4. Australia 100.2 (not ranked)
5. France 103.6 (3)
6. United Kingdom 107.1 (6)
7. Netherlands 107.3 (4)
8. Italy 107.9 (5)
9. Japan 114.3 (8)
10. Germany 116.8 (9)

(Mexico was added to the survey this year, replacing Singapore, which topped the 2006 list.)

Cost indexes of Canadian cities in alphabetical order (U.S. average equals 100):

• Brandon 93.8
• Calgary 102
• Charlottetown 95.8
• Edmonton 99.9
• Fredericton, N.B. 95.3
• Halifax 96.6
• Moncton, N.B. 94.9
• Montreal 98.5
• Ottawa 97.5
• Quebec City 96.3
• Regina 97.8
• Saskatoon 96.7
• St. John's, N.L. 99.5
• Toronto 101.5
• Vancouver 104.2
• Victoria 101.4
• Winnipeg 97.7

-- Canadian Press

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