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Internal Market, Industry, Entrepreneurship and SMEs
Luxembourg - ECSO country fact sheet
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Over the 2010-2020 period, Luxembourg GDP increased from EUR 45.2 billion in 2010 to EUR 57.7 billion in 2020, recording a 27.7% growth. However, the GDP declined by 1.3% in 2020.

In line with the overall economy, the number of enterprises in the broad construction sector increased by 35.9% over the 2010-2020 period, totalling 9,852 in 2020. With regards to sub-sectors, the largest increment was reported by the real estate activities (+43.0%) sub-sector, followed by the narrow construction (+35.4%) and the architectural and engineering activities (+24.8%) sub-sectors over the same reference period, respectively.

The volume index of production in the broad construction sector increased by 1.2% over the 2015-2020 period and total turnover reached EUR 12.7 billion in 2020, representing an increment of 65.7% since 2010. This increase was driven by three sub‑sectors, namely the real estate activities (+79.6%), the narrow construction (+69.2%) and the architectural and engineering activities (+55.1%) sub-sectors over the 2010-2020 period.

35.4%
Number of enterprises in the narrow construction sub-sector between 2010 and 2020
69.2%
Turnover of the narrow construction sub sector between 2010 and 2020

The gross operating surplus of the broad construction sector recorded a significant increase of 61.6% between 2010 and 2018, reaching EUR 1.9 billion. The majority of this increase was driven by growth in the narrow construction sub‑sector (+134.5%), followed by the real estate activities (+39.2%) and the architectural and engineering activities (+7.6%) sub-sectors over the 2010-2018 period. The gross operating rate of the broad construction sector, an indicator of the sector’s profitability, marginally increased from 15.1% in 2010 to 15.7% in 2018. This is lower than the EU-27 average of 16.7%. The real estate activities sub-sector remained the most profitable (47.9%), followed by the architectural and engineering activities sub‑sector (12.1%).

Several schemes have been initiated by the Luxembourgish government to develop and promote the housing market. Under its 2018-2023 Coalition Agreement Programme, the Luxembourgish government plans to completely overhaul the existing housing assistance law and subsidies system to boost the supply of low-cost rental housing.

Under its EUR 93.4 million 2021‑2026 Recovery and Resilience Plan (RRP), Luxembourg plans to recast its housing policy at the municipal level (Housing Pact 2.0). The country has also allocated EUR 24.0 million of the RRP budget to increasing the supply of affordable and sustainable public housing in the country.

The recasting of the Housing Pact will allow municipalities to better distribute existing governmental support to create affordable housing. The government has also allocated EUR 30.5 million of its RRP budget towards the decarbonisation of the transport sector, and EUR 13.0 million towards developing and promoting public digital services. Luxembourg has also directed EUR 6.5 million towards the skilling, reskilling and upskilling of its workforce. Out of this, EUR 5.0 million is allocated to training part time workers while EUR 1.5 million targets training jobseekers.

With regard to the civil engineering market, the government has announced investments of up to EUR 2.2 billion in the country’s rail network over the 2018-2023 period. Additional investments amounting to EUR 390.0 million have also been planned for the tram system over the same reference period. Other key projects include the modernisation of the Brussels‑Luxembourg-Strasbourg railway link by 2022, the upcoming rail link between the capital Luxembourg-City and Esch‑Belval by 2030, and the installation of a European Train Control System on the entire railway network.

Construction is a strategically important sector of the economy and for achieving the EU climate targets in parallel, given the sector’s significant environmental impact, as well as its ability to stimulate the overall economic recovery process. As such, it is set to benefit greatly from the unprecedented investments allocated from the country’s RRP.

In spite of several policy initiatives supporting the development of the construction sector, it continues to face some important issues. The shortage of skilled workers continues to be a major concern and investment in dwellings has remained constrained primarily due to the lack of available land, as well as the absence of sufficient incentives for landowners to build. The regulatory burden is also relatively high for SMEs in Luxembourg and the fear of failure prevalent in the country prevents potential entrepreneurs from starting a business.

The Luxembourg construction sector has a positive outlook overall. The housing and the civil engineering markets are expected to be the primary growth drivers of the private sector. As for the public sector, infrastructure projects and digitalisation, as well as the shift towards a circular and green economy backed by EU funding, are expected to drive the growth.