Business growth and…recruitment difficulties
The Luxembourg Chamber of Commerce launches its ‘Economy Barometer’
The Luxembourg Chamber of Commerce has published the first edition of its Economy Barometer, which is set to be published every six months in order to assess the economic climate and highlight the principal concerns of businesses in Luxembourg. The first edition shows that business activity is growing in 2019 and that companies are optimistic about their future. However, they will have to overcome recruitment difficulties, a problem that is growing, according to the barometer.
From 17 June to 1 July, the Luxembourg Chamber of Commerce conducted a survey of 371 companies with 10 or more employees, representative of the Luxembourg economy. According to their feedback, the economic situation will be favourable over the next six months – which is shown in the barometer by a ‘cloudy sun’ next to ‘sunny weather’. The top indicator of the Economy Barometer corresponds to an average calculated from 7 business indicators that cover the following activities from the previous 6 months and the coming 6 months: employment, profitability, investment, and confidence in the future of the company and the economy. In the first half of 2019, this number came to 63 out of 100.
Future editions will make it possible to compare this indicator and the detailed results of the barometer with those of previous semesters, and thus to observe whether the economic situation is stable or, on the contrary, declining. As this survey will be recurring, it will also be possible to detect at an early stage any new problems Luxembourg companies are facing.
Particularly confident companies
The July barometer shows that activity has increased for 37% of the companies surveyed in the last six months and has decreased for only 10% of them. This positive differential between companies experiencing growth and those in a downswing can be observed across all sectors of the economy. Entrepreneurs are therefore optimistic for the second half of the year. Only 6% of them foresee a decrease in their activity. In addition, a quarter of the companies surveyed expect their profitability to improve in the next six months, compared with 9% who expect a decline.
Optimism is a must for entrepreneurs. 71% of them are confident in the future of their company and 16% very confident, compared to only 12% who are not very confident or not at all confident. Almost nine out of ten companies say they are confident, even very confident, in the future of the Luxembourg economy.
Aside from the issue of recruitment, the only other particularly critical point highlighted by this barometer was regarding administrative procedures and formalities. Indeed, 2% of business leaders find that they have simplified in 2019, while 41% consider them to be more complex. Administrative simplification is a recurrent request from entrepreneurs to public authorities.
In other news, the question of credit brought more positive feedback. Only 4% of companies have experienced ‘significant’ difficulties in accessing credit in the last 12 months, while 8% have experienced difficulties.
Another question in the barometer was about innovation. Industrial companies innovate the most. 40% of them have recently carried out innovative projects compared to 28% of companies overall. The essential role played by industry in innovation calls for a sustainable framework conducive to the development of Luxembourg's industrial fabric, innovation being one of the main factors in an economy's competitiveness.
However, in terms of commitment to Corporate Social Responsibility (CSR), sectoral disparities are emerging. While 40% of financial services companies have carried out CSR projects in the last 12 months, less than one in five companies have done so in the trade, transport and construction sectors. 22% of companies with less than 50 employees have carried out an internationalisation project in the last 12 months, which is more than companies with more than 50 employees who took part in the survey (19%). Supporting these small companies in their internationalisation projects is essential because they may be less well equipped internally than large companies.
The focus of this barometer: Recruitment
Not surprisingly, over the past two years, recruitment needs have affected the majority of companies. Thus, nearly 80% of the managers interviewed had recruitment needs of up to 20% of their total workforce, whether for replacements or new positions. Looking to the future, recruitment needs between 0 and 20% of the total workforce are foreseen, but more companies (16%) believe that recruitment won’t be a need, that the needs will mainly concern job creation (almost 60%), rather than replacements.
A large majority of companies that have previously had recruitment needs (nearly 90%) have already encountered difficulties in recruiting staff. Among these companies, nearly 70% believe that these difficulties have worsened over the past two years, confirming a tight labour market. Of all the difficulties cited, 67% of respondents cite a lack of the sought-after profiles in the Grand Duchy and the Greater Region, 54% state that the available profiles are insufficiently qualified, 34% mention a mismatch between the job offer and candidates' salary expectations, 28% mention competition from other sectors such as the public sector, and 19% mention difficulties in retaining the workforce. The solutions to these recruitment difficulties are numerous and fairly unanimous from one sector to another. Among other things, companies cite ‘internal’ solutions such as restructuring, training, or promotion, then recruitment abroad, temporary workers, advertising, students, interns or apprentices, the use of a recruitment agency, or the use of fixed-term contracts. The use of recruitment from abroad raises other issues, such as language proficiency and the cost of living in Luxembourg.
The profiles that are most sought after by companies are workers, technicians, administrative employees, engineers, and IT developers. Workers, technicians, engineers and IT developers also appear to be the most difficult profiles to find. The reality on the ground is therefore a bit different from what is most frequently highlighted in terms of lacking workforce profiles.
A special report on this topic will appear in an upcoming Merkur magazine.
To read the complete publication (in French) click here.