Luxembourg Attractiveness Survey: what factors influence investment decisions in favor of the Grand Duchy?

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EY Luxembourg releases its second Attractiveness Survey.

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16/06/2023 |
  • EY Luxembourg Attractiveness Survey Photo 1

One of the key drivers of growth is a country or region’s ability to attract investment. EY is pleased to present the second edition of its Luxembourg Attractiveness Survey – a widely recognized reliable study to assess what makes the country competitive on an international level and the main barriers to growth as perceived by (potential) investors.

At the European level, the study has been serving as a benchmark for 22 years. It mirrors both the reality of foreign direct investment (FDI) in the country through the analysis of investments that create new facilities and jobs, and by a survey reflecting the perception of international decision-makers.

In this election year, now more than ever, Luxembourg’s national objectives are a critical topic of discussion. The strategies set out now will play an important role in attracting or discouraging investment in the country over the next few years.

Luxembourg fares slightly better than other European countries, but over-optimism is cautioned

With 37 FDI projects in 2022 (compared to 25 in 2021), Luxembourg has shown a strong increase of +48%. For the second year, Luxembourg ranks first per capita with 5.83 projects per 100.000 inhabitants compared to 3.94 in 2021.

In Europe, FDI has seemingly come to a halt, as a total of 5,962 projects were announced in 2022 – a marginal increase of 1% from 2021.

France, the UK and Germany retained their top three placements for FDI, representing over 50% of the total projects for Europe. Countries with strong nearshoring and back-office capabilities like Portugal, Italy, Turkey and Poland, climbed the rankings and saw double-digit increases (respectively +24%, +17%, +22% and +23%). Ireland, which draws many parallels with Luxembourg, specifically in finance and asset management, is a country to watch with a +21% jump in FDI.

Also, while 67% of investors plan to invest in Europe in the next 12 months, 11% specifically cite Luxembourg as one of the top three most attractive countries in Europe, compared to 9% the year prior. This places Luxembourg in joint 8th place with Switzerland.

FDI grows mainly in supporting activities, slightly away from where Luxembourg wants to be successful

As a central spot in Europe, Luxembourg is a sensible location for firms to conduct their expansion activities. This explains why Luxembourg’s biggest growth drivers were to be found in the sectors that support the economy. Business services accounted for 54% of all FDI activity. This primary focus of investments does not align with the country's objective of attracting industrial and primary business activities – projects that involve pure manufacturing have even halved.

Top priorities will be to tackle key overarching barriers to business growth – such as land costs, labor and tax

Considerations emerging from this year’s study have slightly evolved and highlighted possible risk areas to focus on.


Luxembourg's finance hub makes up 27% of FDI sector market share, compared to only 5% in Europe. The country’s fund industry thrives due to an agile financial ecosystem, yet, warning signs are starting to show, with concerns arising in the context of regulation agility.

While the “availability of the local regulator to provide support” was rated as slightly more attractive compared to other regions, over 40% of investors evaluate the speed of transposition and authorization as less attractive. This theme of agility filters down into all elements of finance and asset management, where Luxembourg should strive to find a healthy balance between pragmatism and compliance.


Luxembourg entered the green finance world years ago, benefiting from early adoption of initiatives such as the Luxembourg Green Exchange (LGX). However, farther to following the EU guidance, Luxembourg is encouraged to take a more proactive approach and actively shape the sustainable finance landscape. Collaboration and coordination among various stakeholders, including market players, lawmakers, associations and academics will be key.


The European Long-term Investment Fund Regulation reforms (ELTIF 2.0), and Retail Investment Strategy, present opportunities for Luxembourg to cater to the evolving needs of the retail market. To remain a leader in alternatives, it will need to address the operational complexities coming out of new regulations to ensure investment processes, accounting and IT systems, and overall business strategies are adjusted to the transforming landscape.


To remain attractive, 40.4% of respondents indicated that Luxembourg should focus on supporting high-tech industries and innovation, followed by supporting small and medium enterprises (36.4%). Investors are optimistic about Luxembourg's workforce with tech skills and 80%+ consider Luxembourg’s local sustainable ecosystems performing as well as or better than other countries, but FDI for core business (e.g., manufacturing, R&D, logistics, etc.) does not yet align with these positive perceptions.

With its 60+ space companies, research labs, and 800 professionals, Luxembourg is a leader in space initiatives. The space industry has the potential to attract more international players, by actively connecting with global space hubs, particularly in the United States, to solidify its position.


Reducing taxation was by far the top focus area in the 2022 edition of the survey but dropped to priority number six this year. A topic that stands on top of investors’ wishes in their decision-making is tax certainty, and taxation systems that are simple and pragmatic to all taxpayers.

A total of 80% of investors rate the tax approach to “global tech companies” in Luxembourg as on par or better than other countries (65% in 2022). Still, considerations for improvement include refining the draft wording of ongoing directives and rules such as Pillar II or ATAD 3.


As in 2022, talent is cited as the biggest positive contributor to investing in Luxembourg, as well as the biggest risk – for both finance and industrial sectors. On the positive side, investors salute Luxembourg for providing a flexible, healthy workplace and culture for employees, putting the country in 4th place for this metric after Italy, Ireland and the UK.

In reality, worrying figures show that the talent gap will have to be addressed urgently. Besides addressing the housing issues and reducing taxation pressure on individuals, recommendations include the reinforcement of vocational and technical skills development, the improvement of teleworking flexibility, streamlining the process for visas, work permits and citizenship, and the enhancement of e-services to citizens.


Luxembourg indisputably remains a favorable choice for FDI in Europe in the view of international decision-makers. However, it is crucial to address the main challenges related to talent acquisition and tax issues as a priority, to sustain and enhance the country's attractiveness. Neglecting these aspects could potentially hinder the success of other ongoing efforts aimed at improving Luxembourg's standing as an FDI destination. While not currently among the top three choices, Luxembourg is steadily making progress and gradually ascending the ranks.

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