The construction sector in Luxembourg is running at full speed but it is facing tensions Photo: Jean-Christophe Verhaegen / SIP

The construction sector in Luxembourg is running at full speed but it is facing tensions Photo: Jean-Christophe Verhaegen / SIP

The construction sector in Luxembourg is growing rapidly but supply and staff shortages and competitors from outside the country pose a threat, says an analysis by Deloitte.

The city of Luxembourg is permanently under construction. Cranes are on the horizon and buildings continue to spring up like mushrooms. “The construction sector is growing rapidly despite all the challenges it faces in Luxembourg,” says Arnaud Willems, partner at Deloitte.

Construction accounted for 6% of the country's gross domestic product in 2019, and the share of employees grew by 10% between 2015 and 1019.

“Building permits have also increased by between 5% and 10% over the same period. It is therefore a sector that is evolving rapidly, but which is also under great pressure,” says Willems.

One of the main problems is the scarcity of raw materials and the resulting rise in prices. Already tangible before the pandemic, the global health crisis has exacerbated the problem. 

“Construction companies are finding it increasingly difficult to obtain supplies, at least at reasonable prices,” says the Deloitte expert. “There is therefore a risk of a mismatch between the order and the actual cost of the project.” However, feedback from the sector suggests a return to a less tense situation in the medium term.

Staff, competition

The second challenge for the sector is the lack of manpower, especially construction workers. “The arduousness of the job makes the sector less attractive,” says Willems. “It should be possible to make it more attractive. In the meantime, there is a significant recourse to foreign labour.”

Finally, the dynamism of the country’s construction market--and the profit to be made--has attracted companies from neighbouring countries. Competition is growing for local players.

In order to better understand the profile of companies and their needs, Deloitte Luxembourg has carried out a study on the sector which includes a benchmark of key players showing a strong fragmentation of the profile of companies and their needs.

The objective is to help them improve their financial performance according to their strengths and weaknesses.
Arnaud Willems

Arnaud WillemsPartnerDeloitte Luxembourg

“We have nevertheless identified 172 players with more than 50 people at this level, which are divided between general construction companies and technical installation companies,” says Willems.

The study conducted by Deloitte compared these players on the basis of their attractiveness on the market and operational efficiency (average Ebitda margin) using the figures available. “The aim is to help them improve their financial performance according to their strengths and weaknesses,” explains the expert.

However, Willems does not point to an overall problem in the sector, but rather to a lack of time to manage more structural and organisational aspects. “Many companies are growing quite strongly and are putting all their resources into managing this growth. This does not always leave them much time to adapt and optimise the administrative and operational processes that are necessary for the sustainability of the sector.”

This story was first published in French on . It has been translated and edited for Delano.