For the second time, professional services network EY has published a Luxembourg edition of its Attractiveness Survey. The study analyses foreign direct investment (FDI) in Europe and Luxembourg. It also includes the perceptions of attractiveness of Europe as well as of the Grand Duchy.
FDI remains stable in Europe
The number of foreign direct investment projects announced in Europe increased by a modest 1% in 2022 compared to the year before. While this is yet another step on the road to recovery from the COVID-19 pandemic, the limited progress probably reflects the economic uncertainties resulting from the war in Ukraine. Nevertheless, EY refers to it as “disappointing” as the number of projects is still lower than in 2019 and 10% below the top year of 2017.
France attracts most projects, Luxembourg #1 in terms of foreign direct investment per capita
France attracted the highest number of FDI projects in Europe in 2022, followed by the United Kingdom and Germany. Luxembourg is in 23rd place but experiences a significant growth of 48% in the number of projects compared to 2021.
For the second consecutive year, Luxembourg comes out as number 1 in Europe in terms of foreign direct investment projects per capita, followed by Cyprus, Spain, Portugal and Belgium. While this list, unsurprisingly, is dominated by smaller countries with a relatively limited population, France is still in 8th position.
Luxembourg’s biggest growth drivers were to be found in the sectors that support the financial and industrial sectors. Investment in the digital/IT/software services sectors tripled.
“Luxembourg’s biggest growth drivers were to be found in the sectors that support the financial and industrial sectors. The business services sector’s FDI increased by three (four projects in 2022 vs. one in 2021) while investment in the digital/IT/software services sectors tripled (nine in 2022 vs. three in 2021). Altogether, the ‘services’ sectors make up one-third of the FDI market share,” the report states.
Luxembourg: An attractive destination
67% of the investors covered in the EY study – mainly representing industries such as the pharmaceutical, finance, business or professional services and chemical sectors – said that they plan to invest in Europe in the next year. This is a marked increase from 53% in 2022, and the highest indication of confidence in 20 years.
As a central spot in Europe, Luxembourg is a sensible location for firms to conduct their European expansion activities.
The three European countries considered as most attractive for FDI are Germany, France and the UK. Luxembourg is in 8th place. More investors plan to increase sales and marketing in Luxembourg than in the rest of Europe. “As a central spot in Europe, Luxembourg is a sensible location for firms to conduct their European expansion activities, and this may explain why so many industrial, consumer, financial, chemical, pharmaceutical and high-tech firms cited plan to increase investment in this particular business area,” the report points out.
Investors rate Luxembourg highly for the availability of a workforce with technology skills, its rollout of 5G and its network of technology start-ups and research institutions. “These positive perceptions align strongly with the reality of FDI, as Luxembourg’s digital/IT/software sector has doubled, making up 24% of FDI sector market share,” EY comments. “In terms of fields with a strong technology component, we witness persistent growth in Luxembourg’s space industry, where projects are linked to space companies conducting R&D focusing on transport, manufacturing, supply and logistics.”
In order to improve its attractiveness, respondents say that Luxembourg should focus on supporting high-tech industries, innovation and SMEs. They also call for the development of education and skills.