Canada's Condominium Magazine
Toronto has more corporate headquarters than any other city in Canada. Many of those headquarters are in the financial services. The city has the highest concentration of financial services headquarters employees in Canada. Domestically, Toronto is the financial capital. But how can Toronto take it to the next level, continue to grow as a financial capital and become a truly global power in the financial services industry? How can it even, given increasing competition, maintain its current position? A group called the Toronto Financial Services Alliance engaged the Conference Board of Canada to look into what makes a city attractive as a destination for financial services headquarters.
In general, headquarters are highly sought after because of the economic benefits they bring. Most importantly, headquarters are a source of high-paying jobs and above-average-paying support services. Top management in financial services typically earn more than twice the average weekly salary earned by the rest of employees. Also, the Conference Board estimates that for every 100 direct jobs at a headquarters, another 74 jobs are supported indirectly. With 11,960 employees in financial services headquarters in Toronto, that would mean an additional 8,850 support service workers—lawyers, consultants, advisors and the like.
Headquarters are also good for a city’s image internationally, showing it as a place with a good business environment, large pools of talent, high-quality infrastructure and attractive quality of life. All of these characteristics, in turn, help to attract more headquarters.
Corporate tax advantage the number 1 draw
The Conference Board study says that businesses look to locate their headquarters in places where they can maximize productivity, have access to the information they need, and find the skilled workers they need. However, the single most important factor a business considers is the corporate tax advantage. On a list of seventeen factors, including quality of life, labour flexibility and labour availability, corporate tax advantage was the top factor for almost 90 percent in a survey cited by the Conference Board. Canada ranked forty-seventh among 135 countries in terms of corporate tax rates, a fact that puts the country at a competitive disadvantage compared to lower-taxed countries.
Transportation a major drawback for Toronto
For most of these factors, Toronto compares favourably with both its domestic and international peers. However, one important area stood out as needing improvement—transportation infrastructure. In particular, improved road infrastructure and mass transit links for commuting purposes was widely cited as an area of concern by respondents.
Conference Board of Canada
In terms of four key criteria—political stability and regulatory certainty; transportation infrastructure; proximity to other financial institutions and headquarters; and telecommunications infrastructure—Toronto is rated highly on three of them. No prize given for guessing which one was found wanting.
“Not surprisingly, a strong majority of respondents suggested that improving transportation infrastructure is the most important objective for Toronto to improve its competitiveness.” Transportation infrastructure includes public transit, highways, and to a lesser extent air transportation.
So, once again, an important study identifies transportation as the fly in Toronto’s ointment. Since headquarters are highly sought after, the report concludes, “Toronto would do well to understand and capitalize upon its strength, while simultaneously working to improve upon the identified areas of weakness.”