What states have the best business climates?

Staff file photo / Volkswagen employees work around vehicles moving down the assembly line at the Chattanooga plant. The company is constructing an $800 million expansion to build electric vehicles at the factory.

Southern states in the U.S. not only have warmer weather but a better business climate than most northern states, according to a business publication which tracks economic growth and development.

In its 16th annual assessment of business climates, Business Facilities magazine ranked Texas, Virginia, Tennessee and Alabama, in that order, as the states most favorable for businesses. The top metro cities for business climates are Orlando, Atlanta, Austin, Texas and Phoenix.

Among mid-sized cities, Birmingham, Alabama was ranked No. 1 and among small metro cities, Huntsville, Alabama ranked No. 1

Texas, which ranked as the fourth best business climate in the country a year ago, displaced last year's top-rated Tennessee with the crown for the state with the best overall environment for business in the analysis by Business Facilities. The magazine cited Texas' growing skilled workforce, innovation ecosystem and readily available renewable wind and solar energy as tops for corporate site selectors evaluating locations for their next project.

The Lone Star state also has some of the richest incentives for businesses locating in the state.

"Texas will see your offer and raise it with lucrative incentives," Business Facilities said. "When the governor reaches for the big chips in the Texas Enterprise Fund, it's usually time for the other folks in the game to fold 'em."

That helped Austin, Texas land the most coveted project of the year so far - Tesla's gigafactory expected to employ up to 5,000 workers.

Tennessee fell from No. 1 to No. 3 in the business climate ranking of the 50 states for Business Facilities.

"Tennessee is a perennial contender for BF's business climate crown" the magazine said, citing the state's low debt and a pro-business regulatory environment.

"The Volunteer State consistently sets a high bar in meeting all of the priorities of businesses evaluating locations in Tennessee, whether it's customized workforce training, pre-certified sites or lower industrial electricity costs," BF Editor Jack Rogers said.

Amazon announced last week it is building its seventh fulfillment center in Tennessee with a new 1,000-employee distribution warehouse in the Nashville suburb of Mt. Juliet. Since 2010, Amazon has invested more than $6.5 billion into its local fulfillment center infrastructure and its employees in Tennessee. Amazon also employs more than 3,000 people in Chattanooga.

Business Facilities said Alabama, home to major automotive and aerospace businesses, also continues to attract new business and has the nation's fourth best business climate.

The grocery chain Aldi U.S. recently announced it will build a new $100 million regional headquarters and distribution center in Loxley, Alabama to support the company's growing footprint along the Gulf Coast.

Business Facilities is a national publication that targets corporate site selectors and economic development professionals.

Best business climate states

1. Texas

2. Virginia

3. Tennessee

4. Alabama

5. North Carolina

6. Indiana

7. Georgia

8. Florida

9. Utah

10. Mississippi

Source: Business Facilities magazine 2020 state rankings.

Best business climate large cities

1. Orlando

2. Atlanta

3. Austin, Texas

4. Phoenix

5. Houston

6. Nashville

7. Dallas

8. Charlotte, North Carolina

9. Kansas City

10. Las Vegas

Source: Business Facilities magazine 2020 state rankings.