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Luxembourg construction firms continue to stumble

Luxembourg construction firms continue to stumble

by Andréa OLDEREIDE 2 min. 12.01.2022 From our online archive
Trade organisation had warned last year that a tough winter awaited building companies, which went bankrupt in high numbers in December
At least 21 construction-related businesses went under in December
At least 21 construction-related businesses went under in December
Photo credit: Shutterstock

Building companies continued to go out of business in high numbers in December, recent data has shown, as the pandemic led to fewer construction orders and inflated prices for materials hurt their bottom line.

In December, at least 21 companies related to the construction sector went under, a statement of court rulings released by the Luxembourg business register showed, out of a total of 130 bankruptcies that month alone.

“Yes, the construction sector is facing issues,” said Patrick Koehnen, the president of the Federation of Construction and Civil Engineering Companies.  “Construction firms declare bankruptcies because of ... the sanitary crisis, as well as the rise in material prices and shortages of materials in the sector.”

The number of bankruptcies in the skilled trades and craft sector jumped by almost 50% last year, with a total of 72 companies going belly-up in the first quarter, an increase of 47% compared to the same period in 2020, according to figures released by the Chambre des Métiers trade organisation.

The lobby group had warned last year that companies could face cash flow problems heading into winter, due to the lack of raw materials and the winding down of government financial aid related to the pandemic.

The Grand Duchy is expected to weather the pandemic better than many of its neighbours, with the country's statistics bureau Statec forecasting the economy to grow by a hefty 7% in 2021 and by 3.5% this year. However, disruption to the global supply chain and an increase in fuel prices just before the onset of winter in Europe have not left the country unscathed.

“During the months of the spring and summer, there was a huge delay of wood deliveries, causing problems with housing construction," Nico Hoffmann, the head of the Luxembourg Consumer Protection Association, said last month.

Consumer price inflation eased in December as fuel prices fell, but remained at a hefty 4.1%, well above the ECB's target rate of below but close to 2%. This can lead to wages also rising quickly, due to Luxembourg's system of indexation.

Moreover, the country may eventually see acute driver shortages, according to Antoine Ries of the Association of Luxembourg Transport Companies, who has predicted Luxembourg could soon face similar problems to those experienced by the UK last year, which saw the nation’s supermarket shelves empty and petrol stations closed.

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