Britain 'third cheapest place to do business'

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Britain is the third cheapest country in the world in which to do business - surpassing even the United States, a new report claims. The UK has the lowest business cost structure among seven major European countries and, on a global basis, is outperformed only by Canada and Australia, according to a study by the accountants KPMG.

The study analysed 27 cost components such as labour, taxes, regulation and inflation. It compared the after-tax cost of starting and operating 12 types of business over a 10-year period.

Ian Barlow, a senior partner at KPMG's London office, said: "Since the last survey was conducted in 2002 the UK has gained ground against other European countries. Being cost competitive is one of the fundamentals in securing inward investment. The UK has historically been good at this with an outstanding inward investment performance compared with competing countries."

Overall, Britain and Australia were the two countries that offer the lowest effective income tax rates for the widest range of operations. Total labour costs, including wages and salaries, statutory and other benefits, were lowest in Canada, Australia, Italy and Britain. Natural gas costs were lowest in Britain and Australia.

From an industry perspective the UK was competitive across a number of sectors, especially aerospace, automotive, telecommunications and pharmaceuticals.

KPMG said the biggest impact on business costs over the past two years had been the fall in the dollar, which has tumbled more than 40 per cent against the euro. This meant the US had enjoyed the largest boost in competitiveness and was the main reason why eurozone countries had declined at the expense of the US, Canada and the UK.

The KPMG survey ranked the Group of Seven countries - Britain, Canada, France, Germany, Italy, Japan and the United States - as well as Australia, the Netherlands, Iceland and Luxembourg.

It also measured wider issues such as the quality of services like transport and education. "Cost is not the sole factor for business attraction in the UK," Mr Barlow said. "Talent and skills base together with academic support are major contributors."

The study also compared cities of more than 2 million people, ranking Montreal in Canada as the most competitive while London was the third most expensive after Yokohama and Frankfurt.

Among UK towns and cities, Stoke-on-Trent was the most cost-competitive, with Birmingham and London at the bottom of the table.