Luxembourg Govt Offers Unemployment Benefits to Construction Sector Amidst Downturn

Covid-19, the Ukraine crisis, and rising prices have impacted Luxembourg's building industry. Therefore, the government offers partial unemployment benefits to maintain employment and secure a skilled workforce for their future housing projects.

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Decline in the Construction Sector

Economic factors have exerted a significant influence on the real estate market across Europe, including in Luxembourg. The construction industry had a considerable slowdown due to the COVID-19 crisis, the war in Ukraine, rising inflation, especially for the raw materials required in construction, and a corresponding increase in borrowing rates. Also, many prospective purchasers are waiting to make a purchase. As of the third quarter of 2022, the number of transactions involving flats has decreased by 38.2%, as reported by the STATEC, which is the national statistics institute of the Grand Duchy of Luxembourg. 

In addition, the activity level in the house sales segment had a significant decrease of 47.3% in the third quarter of 2023 compared to the same period in 2022. Since the third quarter of 2022, there has been a 56.4% decrease in the amount of activity in the market for the sale of building land. Undoubtedly, this decline in real estate market demand adversely affects the construction industry. 

States and the National Statistics Institute of Luxembourg reported that the construction land markets experienced a substantial decline of 56% during the third quarter of 2023. Thus, a 'short-time working' initiative will be implemented in Luxembourg to minimize the drop. This initiative would enable firms to submit applications for state reimbursement of a portion of an employee's compensation.

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Luxembourgian Government's Assistance to the Construction Industry

According to the Economic Committee's assessment on Tuesday, Jan. 24, the government designated particular sectors of the construction industry as experiencing an economic downturn for six months. Companies operating in the construction of residential and non-residential structures (NACE code 41.200) and demolition and site preparation (NACE code 43.1) will be eligible for partial unemployment benefits. Additionally, the program may be expanded to include additional professions, such as civil engineering, or it might develop into employment maintenance plans in response to the sector's demands.

Accordingly, companies in the designated industries must be formed in Luxembourg, possess establishment permission, not be experiencing structural difficulties, and commit to not lay off any employees for economic reasons to be eligible to apply for partial unemployment for economic reasons within the selected industries.

On the other hand, according to Georges Mischo, the Minister of Labor of Luxembourg, it is essential to maintain employment in the sector. They are reportedly obligated to try to assist workers impacted by the current situation. The industry is vital to the labor market in Luxembourg, and businesses operating within the sector will require these workers as soon as the economy begins to show signs of improvement.

As per Lex Delles, Luxembourg's Minister of the Economy, Small and Medium-Sized Enterprises (SME), Energy, and Tourism, the government has decided to utilize short-term work to assist the construction industry in overcoming this challenging phase. Also, this plan will reportedly guarantee that the building industry will have the manpower to carry out significant housing projects once the economy recovers.

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