Luxembourg Government Declares 2 Construction Sector Branches in Crisis

Luxembourg's Government Council (Cabinet) has decided, based on the opinion of the Economic Committee of Tuesday 23 January 2024, to declare certain branches of the construction sector in crisis for a period of six months, running from February to July 2024, and to resort partial unemployment from cyclical sources.

Luxembourg’s Ministry of the Economy and the Ministry of Labor noted that the real estate market has been strongly affected by economic factors throughout Europe, and that Luxembourg is no exception. Following the COVID-19 crisis, the war in Ukraine, high inflation (including in raw materials needed in construction) and the subsequent rise in interest rates contributed to a significant slowdown in the activity of the construction sector. Furthermore, many potential buyers remain in a waiting position. According to Luxembourg's national statistics portal, STATEC, the number of transactions involving apartments is down 38.2% compared to the third quarter of 2022. The house sales segment also experienced a sharp drop in activity in the third quarter of 2023 of 47.3% compared to the same quarter of 2022. Activity in the building land sale market recorded a decline of 56.4% compared to the third quarter of 2022.

This drop in demand in the real estate market inevitably had negative consequences on construction, the ministries stressed. The economic indicators for this sector showed a clear deterioration, with an especially worsening condition in the construction of buildings. Gross value added (GVA) in construction volume fell by 6% year-on-year in the first half of 2023. Furthermore, employment in the construction sector has slowed considerably since the start of the year 2023 until showing virtual stagnation in the 3rd quarter. In October 2023, employment fell by 2.7% over one year, even more sharply than in 2009 during the financial crisis. Business services and construction mainly contributed to this slowdown, the ministries added.

For all the aforementioned reasons, it was decided to resort to temporary partial unemployment and to declare part of the sector in crisis.

Luxembourg’s Minister of the Economy, SMEs, Energy and Tourism, Lex Delles, highlighted in this context that “the government has decided to resort to partial unemployment from a cyclical source in order to help the construction sector to overcome this difficult period. This measure will also ensure that the construction sector has the necessary workforce to be able to deliver important housing projects during an economic recovery.”

Luxembourg’s Minister of Labor, Georges Mischo, stressed that “it is essential to preserve jobs in the sector. We must do everything we can to support employees affected by the current situation. The sector is essential for the Luxembourg labour market and companies in the sector will need these employees as soon as the recovery begins.”

The partial unemployment scheme is only intended for companies in sectors of the construction sector declared in crisis by the government, namely the construction of residential and non-residential buildings and demolition and site preparation.

To be able to apply for partial unemployment from a cyclical source, companies in branches of activity in the construction sector declared in crisis by the government must be established in Luxembourg, have an establishment authorisation granted by the competent authority, not experience difficulties of a structural nature and undertake not to dismiss any employee for economic reasons.

Partial unemployment requests must be sent via MyGuichet.lu no later than the twelfth day of the month preceding the requested period of partial unemployment (for example, no later than 12 March 2024 for the partial unemployment request which relates to the month from April 2024).

Partial unemployment requests relating to February 2024 may exceptionally be sent from 1 to 12 February inclusive. If a company wants to request partial unemployment for February and March 2024, it must send two requests for partial unemployment for the respective months. Access to partial unemployment is limited to 20% of the total working hours normally worked on construction sites (work of an essentially manual nature). Depending on the assignment, the employer distributes the working hours to the unemployed among its employees with essentially manual tasks.