U.S. leaps over Europe as a cost-effective business cost location, says KPMG report.(HEADLINE)

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 U.S. dollar. However, it is the Netherlands, Italy, Germany and the United Kingdom that have seen the greatest increases in costs relative to the U.S., 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.

In Europe, the UK has benefited somewhat at the expense of continental Europe from the stronger appreciation that the euro has seen relative to me pound. France has the lowest cost structure of the European countries, with costs only 3.6% above the U.S. benchmark. Canada and Australia, which in previous years had benefited from a much higher U.S. dollar, now rank second and fourth globally, with business costs essentially equivalent to the U.S.

Mexico, new to the study, is the cheapest place to do business, with costs approximately 20.5% below the U.S. 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.

"In previous years, the UK, Netherlands, Italy and France all ranked lower than the U.S. benchmark; however, now the cost of business is considerably higher in these countries due largely to the depreciation of the U.S. dollar," said Mark MacDonald, global director, competitive alternatives, KPMG. "However, within Europe there is strong evidence of intra-regional competitiveness. The opening of labor markets, more competitive tax rates and investment in infrastructure implies that while Europe has shifted its position relative to the U.S., there is still strong competition among European countries."

In Europe, costs in Paris are comparable with some large U.S. 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.

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