Despite an economic climate marked by international uncertainties and sector-specific crises, the craft sector has reaffirmed its position as a pillar of the Luxembourg economy. With 9,935 businesses and 105,305 jobs in 2025, the sector alone accounts for 20% of the country’s total employment and 19% of all businesses. Whilst employment has grown at an average rate of 3% per year since 1970, the year 2025 shows signs of fragility “that must be addressed in order to build the competitiveness of tomorrow”, in the words of the director-general of the Chamber of Trades, Tom Wirion. A director who refuses to give in to pessimism and who is calling on the government to take action to boost the competitiveness of the economy and businesses. “It is imperative to make competitiveness a top priority so that businesses can continue to operate and ensure the long-term viability of the economy.”

A two-tier sector

The performance of the craft sector varies across different sectors. Some clusters are showing positive growth between 2024 and 2025, such as the food sector (+26% in the number of businesses) and the arts and crafts sector (+31% in the number of businesses). Conversely, the construction sector is going through a difficult period, with a loss of 4,900 employees over three years, representing a 9% decline in its workforce.

This situation in the construction sector is having a significant impact on overall performance: the slowdown in activity, combined with a policy of retaining workers to avoid future shortages, has led to a 33% drop in productivity between 2019 and 2025.

Major financial and structural challenges

The profitability of small businesses is now a key concern. In 2024, 35% of businesses were not making a profit and 28% were considered to be in financial difficulty.

Several factors are fuelling this ‘vicious circle’. Firstly, rising costs driven by increasing wage costs – and mainly indexation – and rising energy prices. In this context, the rise in the minimum wage puts businesses in a difficult position, said Max Urbany, chief economist.

The second factor: the administrative burden. According to the Chamber of Trades, the proportion of administrative staff in the craft sector has risen from 16% in 1990 to 36.5% in 2025, “directly affecting overall productivity”. The final factor: falling investment. “The investment indicator has been negative since the end of 2022, with businesses struggling to secure the necessary funding for their digital transition and innovation,” explained Max Urbany.

Set a virtuous cycle in motion

To turn these challenges into opportunities, the Chamber of Trades is proposing a number of areas for reform.

Firstly, attracting talent. Faced with an inverted age pyramid – 30% of employees are over 50 – it is crucial, according to the chamber, to improve career guidance for young people, facilitate access for cross-border and international workers, and boost demand in the housing sector. Such a boost would have the dual advantage of retaining production capacity and providing housing for the workforce.

The Chamber of Trades is calling for the introduction of a specific ‘SME tax shelter’ scheme, new support measures for businesses affected by the economic climate, and the establishment of a framework to facilitate the transfer of businesses to family members or employees.

According to Wirion, a tax shelter would have the advantage of encouraging individuals to channel their savings into the real economy through crowdfunding or bond issues. A ‘win-win’ scenario for supporting the real economy rather than leaving funds idle

As regards administrative simplification, the chamber is calling for the ‘genuine’ application of the ‘Think Small First’ principle and the ‘once only’ principle. ‘These are essential measures for reducing the burden on business owners.’

The Chamber of Trades is also calling for substantial investment to create sufficient space for existing facilities to expand and modernise.

Artificial intelligence: a catalyst for the future

Wirion said he believes that the digital transition could help the sector bounce back. According to the Chamber of Employees’ ‘Digitalisation – Artificial Intelligence’ survey, in 2025, nearly four in ten companies reported using an AI programme, compared with just 8% in 2023. Whilst AI is mainly used for content creation (87%), its potential for optimising administrative processes – currently exploited by only one in four companies – remains immense.

Whilst artificial intelligence is seen as an opportunity, its integration into the craft sector remains limited. To ensure that SMEs are not left behind, the sector is proposing the creation of a cross-sector ‘AI-Pakt fir Betriber’. This pact would aim to centralise information and support, whilst providing practical opportunities for experimentation in collaboration with the Luxembourg AI Factory.

Lex Delles announces a craft incubator

The minister for the economy, Lex Delles, went out of his way to reassure craftspeople of the government’s support. A point of agreement: Wirion and he both agree that the future competitiveness of the craft sector will depend on the country’s ability to reduce administrative barriers, stimulate productive investment and succeed in harnessing artificial intelligence.

The minister reiterated the commitments made regarding the reduction of administrative burdens, support for ecological and technological transitions, improving energy efficiency, business succession, and the development of new business parks.

He also announced the government’s intention to set up an incubator dedicated to the craft sector. “This facility would enable start-ups, which often have limited capital at the outset, to access premises and modern machinery so they can grow rapidly,” the minister explained.