Luxembourg’s citizens enjoy the highest standard of living in the world. The stable, high income economy is characterised by solid growth, low inflation and low unemployment, and benefits greatly from its proximity to France, Belgium and Germany. The iron and steel industry was once the dominating force of the economy and today continues to be the largest employer in the country, however, it has been overtaken by the dynamic financial sector as the main contributor to gross GDP.
Economy
Luxembourg has experienced strong growth in recent years, with 2007 posting growth of 4.5 per cent. Much of the recent solid growth has come from the country’s success as one of the world’s leading financial sectors and most sophisticated services economies. Media and communications are also considered principle growth sectors. The economy has become increasingly diversified with not just a thriving financial and insurance services sector but also a prominent industry sector which although once dominated by steel now encompasses chemicals, rubber and other products.
Growth in Luxembourg has slowed in line with turmoil in world financial markets but remained above the European average at 3.6 per cent in 2008.
Investment Climate
Luxembourg has a favourable foreign investment climate and successive governments have made efforts to attract new investment in medium, light and hightech industries. Luxembourg is considered a tax haven and the costs of investing through the country are low. There are no formalised legal regimes as such, however the government offers a variety of types of assistance on an ad hoc basis. These include guarantees, cash, tax incentives, subsidised loans and assistance with development and construction projects. For new ventures there are a number of customised incentives on offer, such as the offer of land with favourable conditions at one of the country’s business parks or national industrial parks which are equipped with the infrastructure necessary to support a successful business.
In addition there are other incentives available to both domestic and foreign investors, which include tax reductions and active assistance from the government.
Telecommunications
Luxembourg was initially slow to implement the European Directives to fully liberalise the telecommunications sector. As a result of its small size the country has faced the challenge of the existence of monopoly players in a number of industry sectors, in particular telecommunications. P&T Luxembourg’s voice telephony and public telecommunications monopoly was abolished on July 1, 1998. However, the sector continues to be dominated by P&T. Since 1999 almost 20 licences have been granted to a number of companies the fixed telephony, pre-/post-paid mobile, calling card, and internet markets.
Opportunities
Luxembourg’s stable, high-income economy, with low unemployment and inflation, offers considerable potential for UK exports, especially consumer products. The recent diversification of its economy has also led to opportunities in finance and high technology.
UK Trading Relationship
4,500 British citizens live in Luxembourg and belong to the large international community that accounts for more than a third of the country’s population. UK exports to Luxembourg were valued at £198.8 million in 2008. The trade balance was in Luxembourg’s favour in 2008, with the UK taking goods worth £810 million.
KEY FACTS
Official Name: Grand Duchy of Luxembourg
Capital: Luxembourg
Area: 2,586 sq km
Population: 472,000 (UN, 2008)
Major languages: French, German, Luxembourgish
GDP (current): US$49.46bn (World Bank, 2007)
GDP growth: 4.5% (World Bank, 2007)
GNI per capita: US$75,880 (World Bank, 2007)
Inflation (consumer prices): 4% (2008 est.)
Labour force: 207,100 (2008 est.)
Unemployment: 4.7% (2008 est.) (125,400 foreign workers)
Monetary unit: 1 euro = 100 cents
Exports to UK: £811.25m (HMRC 2008)
Imports from UK: £199.04m (HMRC 2008)
Main Industries
Banking and financial services, iron and steel, information technology, telecommunications, cargo transportation, food processing, chemicals, metal products, engineering, tires, glass, aluminium, tourism.
Main Exports
Machinery and equipment, steel products, chemicals, rubber products, glass.
Main Imports
Minerals, metals, foodstuffs, quality consumer goods.
CONTACTS
UK Trade & Investment
Kingsgate House
66-74 Victoria Street
London SW1E 6SW
Tel: 020 7215 8000
Web: www.uktradeinvest.gov.uk
British Embassy
5 Boulevard Joseph II
L-1840 Luxembourg
Tel: 00 352 22 98 64
Email: britamb@internet.lu
Web:www.ukinluxembourg.fco.gov.uk/en
Luxembourg Embassy
27 Wilton Crescent
London SW1X 8SD
Tel: 020 7235 6961
Email: londres.amb@mae.etat.lu
