United Kingdom

2016 business cost index

90.9

Country ranking

7th / 10

United Kingdom, GDP per capita: US$46,332 (2014), GDP growth rate: 1.9% (2015), Unemployment rate: 5.0% (Q4/2015), Inflation rate: 0.2% (2015)
Locations12016 indexRank12014 indexRank1
United Kingdom90.9794.64
London95.47599.993
Manchester86.41889.43
1  Overall results for the country and cities. Rank for United Kingdom 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 services85.6689.63
R&D services88.1988.84
Corporate services83.3687.32
Manufacturing93.0597.04
2  Rank is relative to 10 countries in both 2016 and 2014.
 
Cost factors3
  • 6.1% currency depreciation against the US$
  • Strong appreciation of pound relative to other currencies
  • Increase in office leasing costs, mainly for suburban offices
  • Large decrease in air freight costs
  • Phased-in corporate income tax rate reduction
3  Significant cost trends between 2014 and 2016.
 
Exchange rate sensitivity4IndexChangeRank5
20% appreciationUS$1 = £0.5399.1-8.27
20% depreciationUS$1 = £0.7985.4+5.56
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 the United Kingdom reflect the combined results for two major cities: London and Manchester. Business costs are very different between these two cities, with a spread of 9.0 percentage points separating them. Even with the current strength of the UK pound relative to the euro, Manchester enjoys the lowest business costs among the 10 major European cities compared, while London is the most costly location among the European cities.
 

Sectors

The results for the United Kingdom vary significantly by sector, ranging from fifth place ranking for manufacturing to ninth for R&D services. Moderate wage and salary levels represent an advantage for the UK in most sectors, but especially in the corporate services sector. However, the highest office leasing costs among the study countries drag down the UK rankings in the service sectors, especially for R&D which has a higher space requirement per employee than digital or corporate services.
 

Cost factors

The UK pound managed to hold some ground against the rising US dollar in 2015, resulting in a rise in value relative to other currencies. However, other cost trends as noted in the table also contribute to the overall results for the UK in the current study.
 

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