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  • Covid-19 has been a massive economic shock but was countered with an impressive policy response: the Luxembourgish economy showed resilience and recovery is under way.
  • EIB results show 8 in 10 firms in Luxembourg have received financial support in response to Covid (EU average: 56%).
  • The challenge is to adapt to the new normal, deal with pre-existing gaps and avoid that an asymmetric recovery that risks creating new divides across firms in Luxembourg and across the EU.
  • Luxembourgish firms are aware of the challenges and ongoing shifts but unlocking investment and addressing bottlenecks, uncertainties and shortage in skills is key.

The European Investment Bank (EIB) and the Minister of Economy with ‘Luxembourg Stratégie’ hosted a joint conference entitled “The Twinning Between the Green and Digital Transitions of Luxembourg” on 13 June 2022 presenting the results of the annual EIB Investment Survey (EIBIS) for the Grand Duchy. 

The conference  was a timely opportunity for representatives from various sectors and from the financial community to debate the short and long-term challenges facing Luxembourg businesses. Together with the EIB Investment Report, the EIB Investment Survey (EIBIS) polled 13,500 firms across the EU to provide an overview of the cyclical and structural dynamics behind investment and investment financing in Europe.

Debora Revoltella, Director of the EIB’s Economics Department, presented the study:  “The survey, which is conducted across Europe including in Luxembourg, provides the EIB Group with a powerful policy tool to understand structural investment barriers, where the crises hit firms more and how we can support the recovery, and help mitigate increasing divergences across households, firms, sectors and economies.“

 EIB Vice-President, Kris Peeters commented: “The Luxembourg economy has proved resilient against the shocks of the past years. It is promising to see that firms operating in Luxembourg demonstrate a positive outlook on future investment, yet they do need further support. Steady investments should underpin the growth potential and productivity, increase the economic and social resilience, and facilitate the green and digital transformation of the Luxembourgish economy. These are also priorities for the EIB. As the EU climate Bank, we stand ready to support our host country in its endeavour to foster the green and digital transition.”

Luxembourg Minister of the Economy, Franz Fayot stated:” There is an urgency to transition towards carbon neutrality. The challenge is to take the people along. But there are many positive signs, behavioral and technological. We need to continue thinking ahead and understand what megatrends mean for us. Luxembourg can be a virtuous world lab by moving rapidly in the right direction. I am an optimist and I am convinced we are moving in the right direction towards decarbonisation, and it is important to do this in a socially inclusive manner, in order to leave nobody behind.”

The conference featured a broad debate on investment needs and priorities for Luxembourg in times of Covid-19 and the transition towards a smart and green economy, as well as on the availability of financing sources for investments. The discussion also focused on the firms’ readiness and adaptability to the new situation by implementing key digital technologies to support their resilience and competitiveness looking ahead.

The EIBIS for Luxembourg shows that firms in Luxembourg became more optimistic in 2021. While the new results show that in the last financial year, the share of firms investing had dropped as a result of the pandemic shock, now more firms – nearly 1/3 of them - expect to increase rather than decrease investment - marking a positive shift. On balance, medium/large firms (22%) have a more positive outlook than micro/small firms (8%).

Asked about the short-term actions undertaken due to COVID-19, digitalisation stands out with 42% having taken action or made investment to become more digital. What is more, COVID-19 will undeniably have a long-term impact on investment needs and priorities, with 60% of firms expecting to make an increased use of digital technologies in the long-term (an increase of 15% compared to the year before).  Innovation activity of firms declined from 47% to 40% over the year (development of new products or processes and services) but it is in line with the EU average.

Regarding drivers and constraints, companies in Luxembourg remain on balance pessimistic about the political and regulatory climate but expectations for the overall economic climate have turned positive again (from -49% to +8%) as have perceptions of business prospects.

Companies also do not perceive major gaps in investment. In spite of the difficult circumstances, over eight in ten firms (85%) believe they invested about the right amount over the past three years. But limited availability of skilled staff (81%) is real and it remains the most cited long-term barrier to investment, followed by the uncertainty about the future (71%).

Access to finance conditions remain benign with only 5% reporting being external finance constrained (in line with the EU average); 13% of companies have increased their level of debt due to COVID-19. But public support was substantial in Luxembourg: 80% of companies report having received financial support in response to COVID-19 and they were generally satisfied.

Luxembourgish firms feel the impact of climate change and close to half (45%) report that weather events have an impact on their business (this is lower than the EU average - 58%).  Firms are starting to internalize the risks of the transition to net zero. Overall, slightly more firms see the transition to stricter climate standards and regulations as an opportunity rather than a risk for their business over the next five years (39% versus 29% respectively). One over two plans to carry investments in the next three years to deal with climate impacts.   

On the management topic, about half of Luxembourg companies report that they have striven for gender balance. This is lower than the 60% EU average. Linking individual performance to pay is where Luxembourg (70%) is in closest alignment with the EU average.

This country overview presents selected findings based on interviews with 180 firms in Luxembourg in March-July 2021. The country results are part of the EIB Group Survey on Investment (EIBIS), which has been administered since 2016. It is a unique, EU-wide survey of 13,500 firms that gathers quantitative information on investment activities of both small and medium-sized enterprises (SMEs) and larger corporates, and their financing requirements and the difficulties they face. It also includes a sample of firms from the United Kingdom

See the Investment Survey reports: