2023 POLICY ROADMAP

The Luxembourg economy grew modestly in 2022, with GDP up just 1.4% and inflation rising to 6.3%, driven by rising energy costs and supply chain issues.

In July 2023, the Luxembourg Parliament approved a new law introducing the principle of a fresh start (“Nouvelle Chance”) for individuals previously involved in bankruptcy, allowing them, subject to certain criteria, to engage in business activity.

2023 Framework Conditions Review

The overall quality of the Luxembourg entrepreneurial environment, as summed up by
its own national experts and as measured by the National Entrepreneurial Context Index (NECI), deteriorated in 2023, with its NECI score falling from 5.0 (just sufficient) to 4.6 (less than sufficient). In
2019, Luxembourg had ranked 13th among GEM economies for the quality of its overall entrepreneurial environment. By 2021, it had fallen to 20th, and by 2023 was down to 23rd. The fall in 2023 reflects an across- the-board reduction in Entrepreneurial Framework Condition (EFC) scores, with 11 of the 13 scoring
lower in 2023 than in 2022, and just two improving (Entrepreneurial Finance and Ease of Entry: Market Dynamics). As a result, Luxembourg’s number of sufficient conditions (score ≥5.0), fell from seven in 2022 to just three in 2023. The greatest reductions in score were for Commercial and Professional Infrastructure (from 5.6 to 4.6), Government Policy: Support and Relevance (5.2 to 4.3), and for Social and Cultural Norms (from 5.4 to 4.5).

Luxembourg is one of many developed, high-income economies in Europe and North
America that has seen the quality of their overall entrepreneurial environment fall from sufficient to less than sufficient since the pandemic.

2023 Entrepreneurial Activity Review

Despite some deterioration in the overall entrepreneurial environment, levels of Total early- stage Entrepreneurial Activity (TEA) in Luxembourg remained relatively high at 9.7%, up significantly from 2022. The male rate (10.6%) is a little higher than that for women (8.7%). Established Business Ownership rates have been fairly stable for the last few years, at a little under 5%.

Almost half of all adults know someone who has recently started a business, see good opportunities to do so locally, or consider themselves to have the skills and experience to start their own enterprise, proportions that are fairly constant over time. However, the percentage of those adults seeing good opportunities who would not start a business for fear it might fail has been drifting upwards recently, from 42% in 2020 to 47% in 2023. The “Nouvelle Chance” legislation noted above may go some way to alleviate these fears.

Making a difference in the world was the top motivation for new entrepreneurs, closely followed
by earning a living because jobs are scarce. Not surprisingly for a small country, many of Luxembourg’s new entrepreneurs are externally focused, with three in five having customers outside the country.

A similar proportion expect to use more digital technology to sell their products in the next six months, and one in four expect to employ at least six people over the next five years. This number is trending negative, as the previous year two in four had this expectation. This may have been influenced by the high proportion of adults (28%) reporting that their household income fell in 2023, the highest for Luxembourg since this question was introduced by GEM four years ago.