Business Climate

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Business Climate

Virginia garners high rankings for its business climate, a complex and important component of a state's economic health and potential.

Why is This Important?

Business climate gives an indication of a state's current economic status and its future growth potential. States with positive business climates are likely to attract new businesses and encourage expansion of existing ones, thus promoting economic growth in the state.

How is Virginia Doing?

As its many accolades attest, Virginia has long been widely regarded as a topnotch state for business, with a high-quality workforce and a business-friendly environment. Challenges remain, however, particularly in terms of adjusting to recent cuts in federal spending due to budget sequestration, as well as ongoing transportation infrastructure and congestion issues in some areas of the state.

Forbes Magazine Best States for Business 2014

State Ranking
Utah 1
North Dakota 2
North Carolina 3
Virginia 4
Maryland 20
Tennessee 21
  • In September 2014, and Forbes Magazine placed Virginia as the 4th Best State for Business, although it should be noted that the Commonwealth has ranked #1 or #2 during the previous eight years of their annual Best States for Business study. Forbes' index is based on a combination of factors for business climate, labor, regulatory environment, economic climate, growth prospects, and quality of life.

    In this year's index, Virginia dropped largely because of lower growth prospects due to reductions in federal government spending in the state. Utah climbed to 1st place, while peer state North Carolina rose to 3rd. Maryland dipped to 20th (down from 18th in 2013), and Tennessee dropped to 21st (down from 15th in 2013).
  • CNBC Best States for Business 2015

    State Ranking
    Minnesota 1
    Texas 2
    Utah 3
    Colorado 4
    Georgia 5
    North Carolina 9
    Virginia 12
    Tennessee 17
    Maryland 36
  • In July 2015, CNBC and dropped Virginia's rank from 8th best state for business to 12th, citing the lack of job creation in the state in recent years. All peer states also dropped in the rankings: North Carolina came in 9th (from 5th), Tennessee ranked 17th (14th), and Maryland was rated 36th nationally (from 35th). CNBC's rankings are based on 51 indicators in business costs, workforce, quality of life, economy, and infrastructure and transportation, as well as several other categories.
  • In its 2014 "Enterprising States" report, the US Chamber of Commerce placed Virginia 12th in its overall Performance category, a drop from 5th place in 2013. The report attributed Virginia's decline to the economic slowdown caused by federal budget sequestration, although it cited the growth of other industry markets and the state's well-educated workforce as partial offsets.
  • Virginia placed 10th for best business climate in the U.S., according to a 2014 report by Site Selection magazine. Peer states North Carolina (3rd) and Tennessee (7th) also ranked in the top ten.
  • In August 2014, Pollina Corporate Real Estate Inc., a U.S. corporate site selection expert, ranked Virginia #4 nationally for its pro-business climate.

What Influences the Business Climate?

Business climate is influenced by a number of factors, including the cost of labor, transportation, and energy; and the tax and regulatory burdens placed on businesses.

Indices of business climate attempt to capture this multitude of factors in different ways. The Forbes index incorporates a large number of measures that capture specific aspects of the business climate. CNBC ranks all 50 states in 10 broad categories, including cost of doing business, workforce, economy, education, and quality of life. While no index provides a perfect measure, they do give an indication of how businesses view the business climate in Virginia.

What is the State's Role?

States can improve their business climate by:

  • finding a balance between pro-business regulation and tax structures
  • promoting an educated labor force
  • ensuring adequate transportation networks
  • raising the quality of life for residents
Page last modified July 20, 2015

State rankings are ordered so that #1 is understood to be the best.

Data Definitions and Sources

Forbes Magazine: Business Costs -- Index based on cost of labor, energy and taxes. Labor -- Measures educational attainment, net migration, and projected population growth. Regulatory Environment -- Measures regulatory and tort climate, incentives, transportation, and bond ratings. Economic Climate -- Reflects job, income, and gross state product growth, as well as unemployment and presence of big companies. Growth Prospects -- Reflects projected job, income, and gross state product growth, as well as business openings/closings and venture capital investments. Quality Of Life -- Index of schools, health, crime, cost of living, and poverty rates. 

CNBC: Publicly available data on over 50 different measures of competitiveness were used to score all 50 states. States received points based on their rankings in each metric. Then the metrics were divided in 10 broad categories: cost of doing business, workforce, quality of life, infrastructure and transportation, economy, education, technology and innovation, business friendliness, access to capital, and cost of living.

United States Chamber of Commerce, Enterprising States 2014: Re-Creating Equality of Opportunity. The Chamber rates states based on indicators in economic performance, exports, taxes and regulations, innovation and entrepreneurship, workforce, and infrastructure. 

2014 Top 10 Pro-Business States Annual Study, Pollina Real Estate.

Site Selection's Top States for Business Climate 2014

See the Data Sources and Updates Calendar for a detailed list of the data resources used for indicator measures on Virginia Performs.

At a Glance:
Business Climate in Virginia

Performance Trend: Trend is maintaining.
State Influence:  

National Ranking: In 2014, Forbes ranked Virginia 4th best in the nation for business. Virginia dropped to 12th place in CNBC's state rankings for business in 2015, and was also ranked 12th by the U.S. Chamber of Commerce.

Related Agency Measures
State Programs & Initiatives

The Virginia Economic Development Partnership was established in 1995 to bring new business and jobs to the Commonwealth through site selection expertise and incentives.

The Virginia Department of Small Business and Supplier Diversity (SBSD) is devoted to the growth and success of the Commonwealth's business community. The result of a recent union of the former Departments of Business Assistance and Minority Business, SBSD supports the creation of new businesses, as well as the care and feeding of existing ones, including those owned by women and minorities.

Additional Information

The Small Business Development Center (SBDC) is an organization of 29 local branches across Virginia that provide professional business counseling, training and information resources to help grow and strengthen Virginia businesses.