At a meeting of the finance and budget committee with the financial services authority on Friday, the CSSF explained that losses of 20% to 30% were conceivable but employment decline was “difficult to quantify” and the body could not say when the impact of digitization would take effect on the labour market.

Mixed signals

The CSSF explained that part of the challenge lies in the mixed signals being sent by the financial sector. The number of actors in Luxembourg has declined but the volume of activities remains positive.

There has been a positive trend in the volume of business in investment funds with assets increasing to around €400-500 billion since last year. The number of alternative investment funds, meanwhile, increased from 236 in 2018 to 254 this year.

The UK’s departure from the European Union is viewed as a potential threat to the sector as the UK is an important ally for Luxembourg.

Banks

The number of banks in Luxembourg has, meanwhile, fallen from 222 in the 1990s to 130 today. Banking activity remains stable with around €830b and 26,317 people employed in the sector. However, it is at the whim of the banking consolidation phenomenon.

Bank preparations for Brexit have, meanwhile, been beneficial to Luxembourg as impacted banks seeking to retain the European financial passport choose Luxembourg to establish offices. This trend has brought an inflow of around €60-70 billion as some 40 companies have committed to establishing operations in Luxembourg.