Ernst & Young released the 2024 edition of its “Luxembourg attractiveness survey,” marking the third consecutive year of this detailed analysis. This report provides a comprehensive look at Luxembourg’s foreign direct investment (FDI) performance for 2023, offering a clear picture of investor sentiment towards competitiveness.
The research of the survey evaluates foreign direct investment (FDI) across Europe by tracking the number of announced projects throughout the year, using EY’s proprietary database, and the EY European Investment Monitor. “We initiated the program three years ago, the quality of the document is improving year after year, and we believe that the timing for the survey is particularly good, following that it has been more than six months after the initiation of the new government,” said Olivier Coekelbergs, EY Luxembourg, country managing partner.
Despite a 4% contraction in Europe’s overall FDI in 2023, with investments not yet bouncing back to pre-pandemic levels, Luxembourg stands out. For the third year running, Luxembourg leads in FDI per capita, although there has been a slight decrease in the total number of projects. The financial sector remains a strong driver, with a significant focus on business services.
Investor optimism
2024 presents Luxembourg with a unique opportunity to boost investor optimism. The government’s comprehensive national plan, addressing a range of critical issues, calls for swift and strategic implementation.
“The willingness of foreign investors to invest in Luxembourg has never been so high. To capitalize on this, it is important to take measures that increase transparency and reduce uncertainty, particularly from a tax point of view.”
Bart Van Droogenbroek, partner and tax leader at EY.
To convert this rising interest into FDI, Luxembourg must continue to take decisive action in crucial areas such as finance, business, talent, and taxation. The moment for decisive action is now, promising significant growth.
Comparison to our neighbors
For the third consecutive year, Luxembourg ranked first in FDI projects per capita, despite a negligible change in total investments. The number of FDI projects decreased slightly from 37 in 2022 to 36 in 2023. Luxembourg had 5.67 projects per 100,000 inhabitants, down from 5.83 the previous year. “One factor that gives us a degree of comfort with the data, especially with the opinion survey, is that we see trends unfolding, I would say that in the first year, there might have been some responses that felt like an anomaly, but when said year after year, then it’s a representation,” said Rebecca Dallas, content manager, and survey author at EY.
France remains the leader in FDI but experienced a 5% drop. The UK recovered with a 6% increase, following a 6% decline in 2022, and secured second place. Germany, in third place, saw a 12% decrease, continuing its pandemic-era decline, and the UK remains the top destination for establishing headquarters in Europe.
Talent attraction still lags
Talent attraction remains the primary concern for both financial and non-financial sectors in Luxembourg, with the skills and availability of the workforce being a critical consideration for firms when choosing investment locations. Executives currently hold the most favourable views of Luxembourg to date, spurred by an ambitious new government plan.
“The survey is all about, the country’s understanding, the strengths and weaknesses towards investor expectations, and that there is no way to attract business anymore based on tax shelter, they see many more factors and expect them to be consistent over the years,” said Julien Delpy, head of markets and communications at EY.
Space sector resilient
Manufacturing productivity in Luxembourg has decreased from 2020 to 2022, leading to job cuts due to rising energy costs and declining labour productivity. The space-related manufacturing sector remained strong, with significant investments in satellite robotics and R&D, underlining Luxembourg’s growing space industry.
The Luxembourg Space Agency, celebrating its fifth anniversary, continues to attract and support diverse space-related ventures, positioning Luxembourg as a hub for space innovation. “The development of the space ecosystem has been a strong success, it is based on several criteria, we have an underlying existing strong industry that should be replicated to have its success followed in other industries,” said Brice Lecoustey, partner at EY consulting.
