Virginia’s long-held position as America’s top state for business has come to an unexpected end. After dominating CNBC’s prestigious rankings for three consecutive years, the Commonwealth has fallen to third place behind North Carolina and Texas in the network’s latest annual assessment.
This shift represents more than just a change in numbers. For a state that built its economic development strategy around its business-friendly reputation, the demotion raises serious questions about Virginia’s competitive edge in the increasingly fierce battle for corporate investment.
The drop appears linked to several factors, most notably Virginia’s declining scores in workforce quality and infrastructure – two areas where the state previously excelled. According to CNBC’s analysis, Virginia scored 1,587 out of a possible 2,500 points, placing it firmly behind North Carolina’s 1,663 points and Texas’s 1,622.
“Virginia has rested on its laurels for too long,” explains Martin Williams, senior economist at Capital Market Insights. “While the state continues to benefit from its proximity to federal government contracts and a strong talent pipeline, other states have been more aggressive in addressing infrastructure needs and workforce development.”
The Commonwealth dropped eight places in the workforce category, an alarming trend for a state whose economic proposition has centered on its highly educated population and strong university system. Virginia Tech’s Economic Research Institute attributes this partly to post-pandemic workforce participation rates that haven’t fully recovered compared to competitor states.
Infrastructure represents another pain point, with Virginia falling five spots in this critical category. The American Society of Civil Engineers recently gave Virginia’s infrastructure a C-minus grade, citing deteriorating roads and bridges plus inadequate public transportation networks in growing regions.
“The warning signs have been there for years,” notes Jennifer Howell, former Virginia Secretary of Commerce. “Our competitors are making massive investments in transportation and digital infrastructure while Virginia’s spending has struggled to keep pace with maintenance needs, let alone transformational projects.”
Governor Glenn Youngkin acknowledged the rankings shift as “a wake-up call” during a press conference yesterday. “We’ve built an economy that’s still among America’s strongest, but this reminds us that economic leadership requires constant reinvention and investment.”
North Carolina’s rise to the top spot reflects years of strategic investment in research facilities, transportation networks, and workforce training programs. The state’s Research Triangle Park continues to attract technology companies seeking connections to academic institutions and a lower cost structure than Northern Virginia.
Texas, meanwhile, secured second place through its combination of no state income tax, regulatory flexibility, and aggressive business recruitment tactics. The Lone Star State scored particularly well in CNBC’s economy category, where Virginia ranked seventh.
What makes the ranking particularly significant is its methodology. CNBC evaluates states across ten categories including business costs, infrastructure, economy, quality of life, technology and innovation, education, workforce, and access to capital. The network adjusts category weightings based on how frequently these factors appear in state economic development marketing materials.
For Virginia, this loss of prestige comes at a challenging moment. The state’s economic development authority recently reported a 15% decrease in new project announcements compared to the same period last year. Several high-profile corporate relocations have bypassed Virginia for neighboring states offering more aggressive incentive packages.
Richmond-based economic development consultant Terrence Mason points to Virginia’s political environment as another contributing factor. “Companies increasingly want stability and predictability. The perception that Virginia has become more politically divided may be influencing some location decisions, particularly for businesses sensitive to social policy issues.”
Federal Reserve data shows Virginia’s economic growth rate at 2.1% last year, lagging behind North Carolina’s 3.3% and Texas’s 3.8%. While still respectable compared to the national average, this performance gap highlights the competitive challenges facing the Commonwealth.
The Virginia Economic Development Partnership has responded with a comprehensive strategy review. “We’re not panicking,” says VEDP President Jason El Koubi. “But we are taking this feedback seriously and developing specific action plans to address our competitive weaknesses.”
State lawmakers from both parties have signaled support for potential infrastructure investments and workforce development initiatives when the General Assembly reconvenes. However, balancing these needs with Virginia’s traditionally conservative fiscal approach presents political challenges.
Despite the setback, financial analysts note that Virginia maintains fundamental economic strengths. The state still boasts one of the nation’s highest median household incomes, low unemployment, and strong fiscal management reflected in its AAA bond rating.
“This isn’t a crisis – it’s a correction,” explains Dr. Sonya Richards of the University of Virginia’s McIntire School of Commerce. “Virginia’s economic fundamentals remain strong, but the competition has intensified. The question is whether policymakers will respond with the urgency this moment requires.”
For Virginians, the implications extend beyond business headlines. The state’s ability to attract corporate investment directly impacts job creation, tax revenues, and public services. Maintaining competitiveness isn’t just about rankings – it’s about securing the Commonwealth’s economic future.
As North Carolina celebrates its new crown and Texas flexes its economic muscle, Virginia faces a moment of reckoning. The path back to the top will require not just acknowledging challenges but making difficult choices about infrastructure priorities, education funding, and business climate improvements.
The race for economic development never ends. Virginia’s slip in the rankings may ultimately prove beneficial if it catalyzes the investments and policy reforms needed to regain competitive advantage in a rapidly evolving business landscape.
