Compared to Little Rock, Ark., Hartford is an expensive place to do business.
But compared to cities in Western Europe, New York and Boston, Hartford’s business costs are fairly reasonable.
That’s according to a recent international business cost study by accounting giant KPMG, which shows that the city has higher structural costs than like-sized cities in the United States — such as Buffalo, Nashville, Raleigh and Salt Lake City — but remains cost-competitive in the Northeast, where financial and aerospace industries are clustered.
Relative costs within the Northeast may be important to European companies that are looking to expand in the United States to take advantage of the declining dollar.
“If you look at Hartford compared to Europe, it is significantly less expensive,” said George Tobjy, senior manager and Northeast leader of accounting in KPMG’s strategic relocation and expansion practice. “Hartford is well-positioned to take advantage of a weak dollar, and its proximity to Boston and New York can be exploited.”
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Connecticut Offers Niche Skills
While Connecticut has niches that can be targeted, it does not have as broad a range of opportunities as like-sized cities with lower business costs.
“If someone is looking to do basic manufacturing, they are not coming here,” said Peter Gioia, economist for the Connecticut Business & Industry Association. “They’re going to Florida or Kentucky. It’s just how the world is. But when it comes to high-precision manufacturing or financial services, Connecticut then becomes very attractive.”
In KPMG’s comparison of 15 mid-sized cities with populations between 500,000 and 1.5 million, Hartford was the second most expensive, after Honolulu. While the cost index average was 100, and Little Rock came in first with an index of 93.4, Hartford’s index was 104.1.
New York’s index was 109.2, while Boston’s was 106.7.
Major European cities were even costlier. London’s index was 129.3. Frankfurt’s was 121.1.
The downward trend of the dollar-Euro exchange ratio has contributed to the widening American-European cost gap. That is apt to make U.S. sites more attractive to major European companies.
“In the next five to 10 years, the U.S. is going to be a desired place to be, and European companies are going to want that U.S. presence,” Gioia said. “The question then becomes, where do you want to be? It could be Connecticut.”
A number of foreign-based companies already employ thousands of workers in the state, including the Dutch insurance giant ING, Stop & Shop groceries (also Dutch-owned), Germany-based Boehringer Ingelheim in Danbury and Trumpf in Farmington (also Germany based).
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Amsterdam Flight A Bonus
Trumpf first came to Farmington in 1969. It moved to its current facility in 1975 and has expanded several times since then. The latest expansion was a 29,000-square-foot addition in 2002 for a laser technology center. “The Hartford area has a lot of similarities in terms of climate with Germany, so it’s not much of a major change,” said Doug Devnew, vice president of finance and administration for Trumpf. “We have a lot of German employees that come over, and it’s not like going to Arizona or Florida, where it would be a much bigger change.”
Devnew said the time change between Germany and Connecticut isn’t too severe, and both JFK and Logan, the main international airports in New York and Boston, are within a two-hour drive. In addition, he said, Northwest’s direct flights between Hartford’s Bradley airport and Amsterdam are an added bonus.
“And there are high-tech workers available, and that’s really a big benefit for us,” he added. “The workforce within 10 minutes that we have access to is varied and skilled.”
Richard Caporaso, office managing partner of KPMG in Hartford, said the city is a reasonable alternative to Boston or New York. “It’s a real positive to be close to those cities but have a cost of living that is not as expensive.”
In addition, Connecticut has been proactive in luring companies with special economic incentives, such as tax credits.
Gioia said that another effective recruiting tool is to urge the principals of the foreign companies that operate in Connecticut to promote the area to their business communites in Europe and elsewhere.
“Get them to talk to who they know back in Europe,” Gioia said. “There really needs to be more personal diplomacy because it’s a lot more valuable. It’s easier and it’s cheap.”
