Luxembourg Company Formation

Luxembourg Investment at all time high

One of the key drivers which Luxembourg Investment is at an all time high is the country’s ability to attract investment.

At the European level, the study has been serving as a benchmark for 23 years. It uncovers both the reality of foreign direct investment (FDI) in the country through the analysis of investments that create new facilities and jobs, and the perceptions of international decision-makers via a survey.

The launch of the first Luxembourg Attractiveness Survey in 2022 provided a first-time benchmark of Luxembourg’s foreign direct investment (FDI) performance against other European countries. With the release of the second edition in 2023, new comparisons were made about Luxembourg’s change in FDI, and in this election year, Luxembourg’s national objectives became a critical topic of discussion for the future attractiveness of the country. Now, the third instalment of the research arrives at a moment when significant change is on the horizon. The optimism in response to the new government plan, post-election, is tangible and expected transformations are likely to influence future foreign direct investment.

Foreign direct investment in Europe loses momentum, previous commitments remain unmet

European foreign direct investment (FDI) has contracted by 4% in 2023, with 5,694 projects announced, remaining 11% lower than pre-pandemic levels and 14% behind the 2017 peak. This is surprising, given that 67% of executives cited plans to invest in Europe in 2023, and 53% the year prior.

Looking at the top countries for FDI, France keeps the leading position but experienced a 5% drop in FDI, UK comes in second with a 6% increase (recovering its -6% drop in 2022), while Germany sits in third place with a decrease of 12%, prolonging its decline in projects since the onset of the pandemic. Firms in the US, the biggest contributor to Europe’s FDI, declared 15% fewer projects in Europe in 2023.

Overall, manufacturing investment in Europe dipped by 1%, yet supply chain reorganization benefited some Southern and Eastern European nations. Investment in business services, and sales & marketing activities at the European level remained strong, growing by 12% and 6% respectively. Interest in Europe’s traditionally largest sectors for FDI – software/digital & IT services, and business & professional services – diminished due to cost-cutting and a general decline in outsourcing.

Turning to perceptions, the outlook is positive with 72% of executives planning to invest in Europe over the next year, and 75% optimistic about Europe’s attractiveness increasing over the next three years. Yet, only 52%  of firms with operations outside the region expect Europe’s attractiveness to increase.

Luxembourg #1 for third year in a row for FDI per capita, despite negligible change in total investments

Luxembourg saw a slight decline in FDI projects from 37 in 2022 to 36 in 2023. For the third consecutive year, Luxembourg ranked first in the total FDI projects per capita (per 100,000 inhabitants), with 5.67 projects per capita, down from 5.83.

FDI was directed mostly into the finance (28%), business & professional services (22%), and software/digital & IT services (14%) sectors. Investors mainly established “business services” projects, which account for 44% of all FDI activity, down from 54% in 2022. This is followed by manufacturing (14%) and headquarters (14%) projects.

New government strategy, a strong factor contributing to highest ever intentions to invest in Luxembourg, but will this convert?

Investor interest in Luxembourg has surged, with 72% (up from 46%) planning to invest within the next year, and 60% (up from 51%) expecting Luxembourg’s attractiveness to increase over the next three years. Executives expect financial services and utilities to be the biggest drivers of future growth, with software/digital & IT services dropping from tied first in 2023 to fourth place in 2024.

Talent continues to be a key risk factor for the allure of Luxembourg’s financial and non-financial sectors. Nonetheless, the tight labour market poses less of a concern in Luxembourg compared to other nations: only 17% view it as a risk, versus 41% in the UK’s non-financial sector, 32% in Ireland, 29% in Belgium, and 21% across Europe. Consistent with the previous year, executives maintain that to stay competitive, Luxembourg should concentrate on supporting high-tech industries and innovation, as well as providing support for small and medium-sized enterprises (SMEs).

New government plan signals a fresh start; window of opportunity to capitalize on positive perceptions is now

Intention to invest in Luxembourg has never been so high. It is possible that some of the positive perceptions around intentions to invest could be influenced by both the results of the election, and the comprehensive coalition agreement of the new government, which has made balancing business expectations and national interests a clear priority. Now, with investor perceptions at their most positive, the government is primed to grasp this short window of opportunity to convert intentions into concrete foreign direct investment.

Strategic organization and prioritization will be needed to enable timely execution of plans, with a particular focus on the investment fund centre, industry 4.0, innovation and R&D, start-up’s and SMEs, talent development, and tax reform.

Without reinventing, ensure quick action for differentiation and sustained growth in investment funds.

Luxembourg’s investment fund sector must act swiftly to differentiate and grow, innovating to stay ahead without overhauling its core. It’s critical to streamline modernization, especially in administration, and to bolster the US relationship for better political and business engagement. Attracting top talent with incentives and improving those for management and investors is key. Effective ecosystem coordination and embracing trends like ELTIF 2.0 and AIFMD 2 are essential, as is upholding its leading role in sustainable finance.

Cement image as a test bed for Industry 4.0, R&D activities, and start-up’s; follow through on coalition agreement.

Luxembourg’s executives pinpoint support for high-tech industries, innovation, and SMEs as top priorities to preserve the nation’s appeal. With a proven model in the space sector, where consistent FDI and a growing ecosystem of over 80 companies thrive, Luxembourg demonstrates no need for new strategies. Instead, replicating this success in sectors like health-tech and defence, which align with the country’s land and energy challenges, is advised. Plans to mobilize land for housing and industrial use are advancing rapidly, with effective implementation being key. Moreover, securing efficient, cost-effective energy sources is vital, as Luxembourg’s commitment to sustainability and decarbonisation is recognized by investors and is integral to meeting foreign investment expectations and fostering the industry of the future.

Deliver on plans to ensure tax pragmatism, certainty and transparency, as set out in the coalition agreement.

Perceptions of Luxembourg’s tax policies have improved notably: executives are optimistic about Luxembourg for tax certainty, stability, management compensation, and sectorial tax incentives, but view the corporate tax rate less favourably. The new government’s ongoing discussions about reform and the implementation of preliminary measures are steps in the right direction, yet the business community eagerly anticipates more substantial legislative transformations. Bringing the corporate income tax rate even closer to the European average, ensuring legal certainty and security around tax law and its interpretation, and addressing concerns about risks of litigation over tax will be crucial.


The attractiveness of Luxembourg is at an all-time high. This wave of enthusiasm could in some ways be attributed to the ambitious coalition agreement set out by Luxembourg’s newly instated government. The current period presents a pivotal opportunity for the government to harness investor optimism, and put into action their newly outlined national plan, which places all possible relevant topics on the agenda. Now, execution is critical. Prompt and strategic action across a handful of key areas is necessary to ensure that this wave of positive intent is rapidly converted into actual foreign direct investment.

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