Business climate indicates how states, regional and local policies,
relationships and local communities support business development.
Ultimately, a good business climate allows businesses to conduct
their affairs with minimal interference while accessing quality high
inputs and customers at low costs. While no business climate is
perfect for every kind of company, certain attributes of the
regional or local economy allow investors to find fewer risks and
higher returns when compared to other places.
Key factors used in the measure of business climate include:
- Business and income tax levels
- Workforce availability
- Energy costs
- Market size
- Quality of services
- Cost of living
- Quality of life
- Environmental regulation
- Permitting, licensing, and various reporting regulations
- Real estate costs and availability
- Access to financing and capital
Trends in Business Climate
Businesses relocate or expand in places with business climates
favorable to their industry. States and localities targeting
specific sectors fine-tune their regulations, policies and other
site location factors to create a business climate favorable to a
specific industry or group of industries. Key trends include:
- The pervasive need for an available skilled workforce has
spurred workforce development initiatives, with a particular
emphasis on training in new technologies.
- De-regulation of utilities has allowed businesses to
purchase lower cost energy.
- Localities now offer incentives, such as tax breaks, to
businesses that are expanding locally not just those that are
relocating to the area for the first time.
- Income tax is kept as low as possible because many skilled
workers demand high net pay and prefer working and living where
they have maximum purchasing power.
- Local governments create one-stop centers to streamline the
process for obtaining business permits when beginning or
- Public and private sector investment initiatives in
telecommunications infrastructure ensure that high speed, high
bandwidth communications are available for business.
- To encourage the growth of e-commerce, the Internet Tax
Freedom Act signed in 1998 imposed a three-year moratorium on
new state and local taxes for online transactions and sales.
- Localities focus resources on improving arts, culture and
other the quality of life factors to attract and retain skilled
workers that businesses seek.
- Development of affordable housing attracts and retain key
workers who may other wise be priced out of the local housing
market in a growing economy.