Canada

2016 business cost index

85.4

Country ranking

2nd / 10

Canada, GDP per capita: US$50,235 (2014), GDP growth rate: 1.2% (2015), Unemployment rate: 7.0% (Q4/2015), Inflation rate: 1.1% (2015)
Locations12016 indexRank12014 indexRank1
Canada85.4292.82
Montreal, QC85.21192.011
Toronto, ON85.61493.615
Vancouver, BC86.21794.633
1  Overall results for the country and cities. Rank for Canada is relative to 10 countries in both 2016 and 2014. Ranks for cities are relative to 111 cities in 2016 and 107 cities in 2014.
 
Sectors2016 indexRank22014 indexRank2
Digital services74.0282.22
R&D services72.3284.23
Corporate services73.9287.53
Manufacturing90.3296.22
2  Rank is relative to 10 countries in both 2016 and 2014.
 
Cost factors3
  • 21.6% currency depreciation against the US$
  • Increase in lease costs for downtown and suburban office space
  • Increase in costs for industrial land
  • Reduction in R&D tax credits result in higher effective tax rate
3  Significant cost trends between 2014 and 2016.
 
Exchange rate sensitivity4IndexChangeRank5
20% appreciationUS$1 = CA$1.0791.7-6.32
20% depreciationUS$1 = CA$1.6181.2+4.22
4  "What if" sensitivity scenarios based on appreciation or depreciation relative to the US dollar.
5  Rank among 10 countries assuming equal appreciation/depreciation of all currencies relative to the US dollar.

Locations

National results for Canada reflect the combined results for two major cities: Montreal and Toronto.

Total business costs in these two cities are relatively similar, within 0.5 percentage points of each other. The cost gap between these two cities has diminished since 2014, with higher labor costs and reduced tax incentives in Montreal eating away at the cost advantage it holds over Toronto. Out west, Canada’s third major city, Vancouver, has higher business costs than either Toronto or Montreal, with high property costs being the main distinguishing factor for Vancouver. However, costs for all three cities are well below the US baseline.
 

Sectors

Among the four study sectors, Canada consistently ranks second among the 10 countries across all sectors. Significant incentive support for R&D activities in Canada, from both federal and provincial governments, helps to position R&D services as the sector in which Canada holds its greatest cost advantage, with total costs 27.7 percent below the US baseline.
 

Cost factors

The rise in value of the US dollar relative to its Canadian counterpart through 2015 is the main driver of improved cost index results for Canada and its cities in 2016. As a result, Canada has managed to increase its overall cost advantage relative to the US to almost 15 percent, even as the cost trends noted in the table lead to somewhat higher local business costs in Canada.
 

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