Deloitte Luxembourg took this opportunity to prepare a comprehensive market analysis of German-speaking companies and to discuss the opportunities and challenges with people from the business and in politics. Published on Wednesday, “Der deutschsprachige Markt in Luxemburg – Nachgefragt -  Aus ganzheitlicher Perspektive” was presented within the scope of a conference attended by over 100 participants, and held high-calibre guest speakers, including Christine Gläser, German ambassador of Luxembourg, Carlo Thelen, director of the Chamber of Commerce, Nicolas Soission, director of Fedil and Anouk Agnès, deputy director of Alfi.

“As of to date, a comprehensive analysis of Luxembourg's key economic relations with German-speaking market participants had not been carried out. Therefore, we were faced with an interesting challenge." Ruth Bültmann, Partner and Leader of the German market at Deloitte Luxembourg explained. “Our study examines in detail the economic relations and key industries of the Luxembourg economy with German participation. The trends and challenges in these sectors are particularly important and addressed separately. To this end, we have collated the figures and results from existing surveys and gained additional insights and assessments by conducting numerous interviews with Luxembourg industry experts."

Economic relations between Luxembourg and Germany are strong, a fact that is reinforced by Christine Gläser, German ambassador of Luxembourg, both within the scope of the study and during the conference. As an example, she cited the following exports: in Q2 2013, Germany imported more Luxembourgish products than any other country. The value of these goods estimated to a total of €750 million, contributing to 28% of all exports. The close relationships between the two countries also enjoy state support, as observed through the 2012 creation of the Business Club Luxembourg in Germany. This association supports the Luxembourg Ministry of the Economy and Foreign Trade and the Chamber of Commerce in order to intensify economic relations as well as through the creation of its very own economic department in the Luxembourg Embassy in Berlin.

According to the Deloitte market overview of the individual economic sectors, German-speaking companies hold a strong presence in the financial sector.

As of 2014, 147 banks from 26 different countries are located in Luxembourg, of which around a quarter are from Germany . This is despite the decline in employment numbers and consolidation as a consequence of the crisis, in addition to the relocation of activities to fund management or the PSF. The greatest challenges are currently found in the realignment or restructuring of activities (asset management, reporting within the scope of the automatic exchange of information) and the implementation of regulatory requirements, such as FATCA or Basel III. The fund industry is also confronting these challenges. Anouk Agnès, deputy director at Alfi, explains, “The wave of regulation not only impacts on our geographical location but also the entire European fund industry. Besides the European regulatory measures such as the AIFM directive, UCITS V, UCITS VI, third countries have also adopted laws and regulations, such as the Volcker Rule.”

In terms of the share of total fund net assets of €2.5 billion under management in 2013, German promoters are ranked second, accounting for 15.8% of funds launched in Luxembourg, right behind the United States with 23.4% . The importance of German-speaking companies is also clearly reflected by the cross-border distribution and registration of funds for distribution. While Switzerland is the largest sales market for Luxembourg funds (67%) outside the EU, Germany is the largest inside the union (63% market share). The sustainable investment fund sector, for which social criteria are at the forefront of the investment decisions, is likely to become another pillar of the Luxembourg fund industry.

However, German-speaking companies play a more secondary role in the insurance sector. According to Marc Hengen, CEO and Chairman of the Management Board at ACA, the key markets for Luxembourg insurance companies are Belgium, France and Italy; Germany, Austria and Switzerland are not even among the top 3.

393 companies in the Luxembourg economy have German management or a German parent company. German-speaking companies are therefore ranked third after Belgium and France. Supported by EU subsidies, the logistics sector is currently on the rise. 20 German ships already registered under the Luxembourg flag in 2013. Georges Kioes, Partner at Deloitte Luxembourg and Commerce, Industry and Public Sector Leader, explained: “The Luxembourg government promotes new sectors such as logistics or ICT through targeted activities, as part of its Cluster Initiatives, for example. By doing this, the Grand Duchy seeks to diversify and strengthen its competitiveness. One of the latest of these initiatives is the ‘ICT Taskforce’, which was founded in summer 2013 and revolves around environmental technology, electronic payment systems, cyber security or data management.”

There are close ties with German healthcare companies in the field of life sciences and healthcare. CHL, for example, was given the title ‘Academic teaching hospital of Saarland University’ in 2008. The Max Planck Institute Luxembourg for International, European and Regulatory Procedural Law began its work in the Grand Duchy in autumn 2012.

Jan van Delden, Partner at Deloitte Luxembourg co-leading the activities for the German market in Luxembourg, concludes: “The study has shown that the Luxembourg market but also the German players on the market are facing future challenges, which will bring about a substantial change. Since 2011, Deloitte has increased its focus on the German market in Luxembourg and developed its service offering. With a team of more than 175 German speaking employees, we try to prepare our clients to be ready for and able to manage this change.”

The full report with all results of the study is available on the Deloitte Luxembourg website at http://www.deloitte.com/lu/brochure/deutschsprachiger-markt-luxemburg