Based on the report of the Economic Committee of 23 January 2024, the government in council has decided to declare certain branches of the construction sector in a state of crisis for a period of six months, from February to July 2024, and to implement short-time working for economic reasons.
Throughout Europe, the real estate market has been strongly affected by economic factors, and Luxembourg is no exception. Following the Covid-19 crisis, the war in Ukraine, high inflation (including for the raw materials needed in construction) and the subsequent rise in interest rates contributed to a significant slowdown in activity in the construction sector. What's more, many potential buyers are waiting to buy. According to the Grand Duchy of Luxembourg's national statistics institute, STATEC, the number of flat transactions is down by 38.2% compared with the third quarter of 2022. The house sales segment also saw a sharp fall in activity in the 3rd quarter of 2023, of 47.3% compared with the same quarter of 2022. Activity in the building land sales market declined by 56.4% compared with the third quarter of 2022.
This decline in demand on the real estate market inevitably has a negative impact on construction. The economic indicators for this sector show a clear deterioration, with a particularly bad situation in building construction. The gross value added (GVA) by volume in construction fell by 6% year-on-year in the first half of 2023. It should also be noted that employment in the construction sector has slowed considerably since the start of 2023, and was virtually stagnant in the 3rd quarter. In October 2023, employment fell by 2.7% year-on-year, even more sharply than in 2009 during the financial crisis. Business services and construction are the main contributors to this slowdown.
For all the reasons outlined above, it has been decided to resort to short-time working for cyclical reasons, and to declare part of the sector in crisis.
The Minister of the Economy, SME, Energy and Tourism, Lex Delles, stressed in this context that "the government has decided to use short-time working to help the construction sector get through this difficult period. This measure will also ensure that the construction sector has the necessary workforce to be able to carry out major housing projects when the economy recovers".
Minister of Labour Georges Mischo stressed that "it is vital to preserve jobs in the sector. We must do everything we can to support employees affected by the current situation. The sector is vital to the Luxembourg labour market and companies in the sector will need these employees as soon as the economy starts to recover."
The short-time working system is intended solely for companies in those branches of the construction sector declared to be in crisis by the government:
- Construction of residential and non-residential buildings (NACE Code 41.200)
- Demolition and site preparation (NACE Code 43.1)
Further information on the NACE statistical classification of economic activities and a detailed description of the various activities can be obtained by following the link https://statistiques.public.lu/dam-assets/catalogue-publications/nace/nace-2.pdf.
To be eligible to apply for short-time working on economic grounds, companies in branches of the construction sector declared to be in crisis by the government must be established in Luxembourg, hold an establishment permit granted by the competent authority, not be experiencing difficulties of a structural nature and undertake not to make any employees redundant for economic reasons.
Applications for short-time working must be sent via MyGuichet.lu no later than the 12th day of the month preceding the period of short-time working requested (for example, no later than 12 March 2024 for an application for short-time working relating to the month of April 2024).
Exceptionally, applications for short-time working for the month of February 2024 may be sent from the 1st to the 12th of February inclusive. If a company wishes to request short-time working for the months of February and March 2024, it must send two short-time working requests for the respective months.
It should be noted that access to short-time working per company is limited to 20% of the total working hours normally performed on the sites (mainly manual work). Depending on the assignment, the employer allocates the working hours to be laid off to his employees performing mainly manual tasks.
For more information on short-time working and the procedure to follow, companies can visit https://guichet.public.lu/fr/entreprises/sauvegarde-faillite/sauvegarde-emploi/chomage-partiel-technique/conjoncturel-construction.html
Press release from the Ministry of the Economy / Ministry of Labour