THE ROLE OF THE FINANCIAL SECTOR IN THE ECONOMY

The financial sector remains a cornerstone of Luxembourg’s economy. In 2024, it directly employed 15% of the national workforce – amounting to 73,272 of the country’s 487,000 salaried employees. Moreover, it generated 30% of the nation’s gross value added, measured at constant prices, base 2015 [6].

Over the past decade, the financial sector has consistently maintained its economic significance. Its contribution to GDP increased slightly from 27.6% in 2014 to 30.1% in 2024. This growth was driven not only by banking, investment fund management, insurance, financial holding companies, and other financial services (the "core" financial sector), but also by legal, audit, and consulting services supporting the financial sector (“professional services”).

Notably, while the core sector’s share of GDP remained relatively stable at around 25%, the contribution from professional services firms increased from 2.5% in 2014 to 4.6% in 2024. This trend underscores the central role of the overall financial services “ecosystem” in the Grand Duchy’s economy, which is in line with its dimension as an international financial sector.

The sector also stands out for its productivity. In 2024, each employee in the financial sector contributed an average of EUR 236,400 in gross value added – 2.4 times the EUR 97,000 average generated by employees in other sectors of the economy.

MULTIPLIER EFFECT

Beyond direct employment, the financial sector has a multiplier effect on the broader economy. For every job created in the financial sector, it is estimated that 1 additional job is created in the general economy in Luxembourg.

In addition to the 73,272 individuals directly employed in the sector, financial services firms support the creation of an estimated 48,927 indirect jobs [7]. These arise through demand for goods and services (intermediate consumptions in the other sectors [8]) provided by both primary suppliers and the suppliers of those suppliers particularly from:

  • Professional, scientific, and technical services – such as engineers, architects, tax advisers, advertisers, or researchers;
  • Administrative and support services – including facility management, administrative functions, and security services.
  • Information and communication technologies (ICT) – covering data processing, content distribution, and IT and telecom services.

Furthermore, the financial sector contributes significantly to household income, paying over EUR 9bn in wages in 2024. This income stimulates consumption, which in turn creates additional economic value. Estimates indicate that consumption-related induced effects generated 13,806 additional jobs, even after accounting for personal income tax, social contributions, savings, cross-border shopping by concerned employees, and the import share of local expenditures.

The financial sector and its supply chain also made substantial investment in 2024, generating further economic activity. These investment-induced effects led to the creation of an additional 10,650 jobs.

Source: Muriel Bouchet, former Director Fondation IDEA asbl Created with Datawrapper

Conclusion

In total, 146,655 jobs have direct, indirect, or induced links to the financial sector, broken down as follows:

  • 73,272 direct jobs
  • 48,927 indirect jobs
  • 13,806 consumption-induced jobs
  • 10,650 investment-induced jobs

This reflects an employment multiplier of 2, meaning that every direct job in the financial sector creates one additional job elsewhere in the economy (through the indirect, consumption-induced and investment-induced effects).

It is important to note that this estimate is relatively conservative given that savings and taxes (plus social contributions) are handled as if they were simply deadweight losses to the economy. This is of course not the case. For instance, income tax can be used to finance public employment or public investments that contribute to increase the construction sector’s workforce. Yet, these additional positive effects are not accounted for in the current estimates. In addition, only two loops are considered in the calculations (“suppliers” and “suppliers of suppliers”), which also tends to moderate the results.

[6] The use of constant prices (based on the 2015 base year) eliminates the effects of inflation, enabling more accurate comparisons over time. During the review period, the inflation rate varied significantly, ranging from a modest 0.3% in 2016 to a peak of 6.3% in 2022, before stabilising at 2.0% by the end of 2024. Click here for further details.

[7] The estimated 48,927 jobs include:

· 34,259 additional jobs generated by the direct suppliers to the financial sector (“knock-on effect”),

· 14,668 additional jobs from the so-called “second-round effect,” referring to the suppliers of those suppliers. Indeed, the direct suppliers of the financial sector acquire inputs from other providers as well, resulting in the creation of new added value and additional jobs.

[8] Intermediate consumptions is estimated based on the matrix of inputs and outputs for 2021 made by STATEC.