The evolution of industry in Luxembourg

The term "industry" sometimes describes manufacturing and construction, but also can be used to describe the fund industry. Fedil, a multi-sector business federation representing the country's manufacturers, has over 700 members, including the Big Four consultancies and big names in construction such as the Félix Giorgetti group and CDCL. Paperjam’s focuses mainly on the manufacturing industry, i.e., according to the harmonised nomenclature at EU level - section C of NAF rev. 2 - goods-processing industries, mainly own-account manufacturing, but also the repair and installation of industrial equipment.

Peak mid-20th century

The history of industry in Luxembourg dates back to the late 19th century. At that time, Luxembourg went from being a predominantly agricultural country to an industrial powerhouse. By the middle of the 20th century, the country was even the world's largest steel producer. At the time, the steel industry accounted for 25% of GDP and employed 25,000 people.

However, the steel crisis of the 1970s prompted the government to diversify the economy. Tax breaks turned Luxembourg into a major financial centre, replacing steel as the economic engine. Since then, the industrial sector has seen its weight in the country's GDP decline, but it continues to innovate and is still one of the five main branches of activity that dominate the employment market. Even today, "Luxembourg is still very much focused on metallurgy, steelmaking and metalworking", said Bastien Larue, head of the business conditions, modelling and forecasting department at the statistics bureau Statec.

Expected improvement

"These are sectors that are more important than the average in other European countries,” said Larue. While there are no car manufacturers in Luxembourg. The tyre-maker Goodyear is the ninth largest employer in the country with 3,440 employees, but it is an equipment manufacturer. "Industrial production is still on a downward trend in Europe, and there will be a relatively marked downturn in Luxembourg in 2023, but without too much damage to the industry's workforce. The automotive crisis in Europe, inflation and the property crisis are weighing on the manufacture of capital goods, and therefore on industry. Rising interest rates are also holding back business investment. In the short term, we can't see any improvement at the moment, but we can hope for one, particularly with a recovery in the automotive and construction sectors in the coming months.”

Despite its small size and rural character, Luxembourg has enjoyed a remarkable industrial boom and has also managed to resist deindustrialisation better than its European neighbours, thanks to government support and a policy of diversification. Today, the country has a high proportion of innovative companies, particularly in the ICT sector. Luxembourg industry is constantly evolving, adapting to technological change and moving towards a model where services and products are integrated.

This article was written for the  released on 29 January 2025. .

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