Research compares the cost of running a business around the world, Budapest, Prague and Warsaw top the list

It may come as a surprise to many but a recent study, performed by the team at Utility Bidder, found that Budapest is the most cost-effective place to run a business in terms of cost. While it didn’t come out on top in every category, its low cooperation tax, among other things, helped it come out on top with ease.

So what does this mean for the rest of the world? And what does the ‘cheapest place to run your own company’ actually mean?

There are numerous expenses that need to be considered when running a company, whether you’re a start-up or an established business. These include, but are not limited to, things like the amount you pay your staff, the cost of the ideal office space, taxes and the price of utilities that you need just to keep your office running. These expenses vary wildly around the world and Utility Bidder’s study shows the cheapest place to run a business for each of these costs, and the most expensive.

What did the study find then? In terms of salaries, relative to the GBP, Mexico City came out with the average lowest salary. The average person in Mexico City is paid just $362,000 (Mexican Dollar), which works out as £13,000. This means that the money you’d need to set aside for staff costs would be incredibly low. On the other hand, Switzerland came out with the two highest average wages, with Zurich came out the most expensive, at £85,000 (or $106,250 USD), and Geneva just behind on £83,300 (or $104,125 USD). The rest of the bottom ten for average wage were all in the United States, making them a pricey place to employ people.

So wages is one thing, and compensating people effectively may well be something you don’t want to compromise on, especially if you’re looking for both skilled team members and better employee wellbeing. But what about office space? Finding the right premises for your business is extremely important. Something that matches your company’s image but also allows your employees to work to their full potential. With that in mind, have you considered renting office space in Palma De Mallorca? The sun-soaked Spanish island comes out cheapest at an average of £15.04 ($18.57 USD) per square foot, while Malaga and Valencia came in just behind. This makes Spain the no.1 place for cheap office space. On the flip side, you’ll find New York City by far the most expensive, with an average cost of £159.48 (or $196.89 USD) per square foot!

But what happens when you find the office space of your dreams for a bargain price, and you discover the running costs are just far too much? The price of utilities is something you really need to think about when you’re finding an office. As an ongoing cost, utilities can really add up if you’re not careful, and you don’t want to be stressing about the amount of electricity you’re using, or your internet bill. Both will be key to keeping your business running and making sure you can maximize your output.

The South Korean city of Seoul comes out on top for the cheapest electricity at just £0.06 per KWH. Other factors make the city itself slightly less affordable, but such cheap electricity prices aren’t to be sniffed at. Canada’s main cities are up next, with Vancouver, Calgary Toronto and Montreal all boasting electricity at £0.07 (or $0.09 USD) per kwh. Portugal fairs a little worse, with Lisbon and Porto coming out rock bottom for energy prices at £0.24 ($0.30) per kwh.

Connectivity is essential for any modern business. Without internet access, a large proportion of companies would just grind to a halt. Being so important to the day to day running of a business, you want to make sure you’ve got a reliable connection that doesn’t break the bank. This makes the average cost in Warsaw of just £138.24 (or $172.8 USD) per year an absolute steal for business broadband. Budapest comes out just below this too, at £146.76 (or $183.48 US). America has a number of major cities right at the bottom of the list, with by far the most expensive business broadband. In Atlanta, you’ll be paying out £62.11 (or $77.64) a month, which adds up to £745.32 (or $931.68 USD) a year.

So what about corporation tax? The amount the local government taxes a company’s income can vary wildly. It’s usually defined by the country rather than the city. Looking at it alone isn’t necessarily the best thing to do either, as other expenses can really mount up. Many governments add other fees in addition to taxes too, which doesn’t help, but it’s really hard to look past Budapest’s incredibly low corporation tax. Coming in at just 9% it’s a full 10% lower than the other nearest cities in this list, which are all in the UK and are taxed at a rate of 19%. This includes cities like Belfast, Liverpool, Southampton, Glasgow, Leeds and London.

When putting together the research into the key cities in OECD countries, all of these factors were taken into account and a normalized score out of 100 was applied to each city. Budapest came out on top as the cheapest city to run a business in. With a low average wage of £15,600 (or $19,500 USD), a relatively cheap average of £33.51 (or $41.37 USD) per square foot office space, low rates for electricity and internet and finally that startlingly low corporation tax, Budapest scored a deserved high of 90.72 out of 100, with the nearest city to it being Prague at 83.91. That’s quite the gap. It’s another eastern European city that slots in at third, Warsaw, with a score of 82.20 only seeing it fall short of second because of its electricity costs.

Three of the world’s biggest cities bottom out the list as the most expensive OECD cities to run a business in. These are San Francisco, with a score of 38.89, New York City, with 39.67 and Tokyo at 43.43. Wages, office space, electricity costs and corporation tax are what push the US cities into the bottom. While in Tokyo you’ll find a cheaper average wage than these two cities, by a long way, but a significantly higher cost of electricity. To see where your city comes in, check out the full report for a league table.

While this study highlights the cheapest and most expensive OECD cities to run a business, it’s always worth considering other factors when you’re deciding where you want to set up. Just because the corporation tax is low somewhere, or the average wages, does that mean you should be thinking about moving your office there? A business switching service, like Utility Bidder, can help you compare business utility costs across the UK so you can work out the best deals for your company.

Read next: Research reveals European countries are topping as the best providers of Digital Quality of Life
Previous Post Next Post