Luxembourg’s Small and Medium Sized Business minister unveiled the country’s fifth SME plan on 25 July, a list of broad measures aimed at removing entrepreneurship barriers.
Access to finance, the promotion of Luxembourg companies abroad at trade fairs, stronger promotion of entrepreneurship in education and support for companies facing financial difficulties, are among the key takeaways.
The to-do list appears to take on board the manifesto of the Luxembourg Startups Association (LSA), a federation of startup founders made by startup founders.
One key tenet of its manifesto is the right to a second chance in the event an entrepreneur files for bankruptcy, since many founders argue that failing is part of the journey of building a successful business.
Currently, entrepreneurs who have filed for bankruptcy are not allowed a second business permit. Given that Luxembourg recorded some 1,050 bankruptcies in 2022 according to national statistics body Statec, this impacts a considerable group of entrepreneurs.
Luxembourg’s insolvency law reform, approved on 19 July, offers founders a second chance in cases where bad luck and mismanagement (such as the loss of a major client, a series of client bankruptcies, health problems of the manager or unintentional management errors) led to bankruptcy in good faith. A second chance commission would determine if this criteria is met. The ministry may also use its discretion to allow a founder a second chance if debts to the State do not exceed 1% unpaid VAT, 1% unpaid taxes, 4 months of social security contributions. The LSA recommends a revision of the bad luck definition to take into account risks linked to innovation and innovative projects such as the product-market fit.
Access To Finance
Access to finance was a take-away from the 2022 Silicon Luxembourg survey which revealed that more than half of respondents had not received any non-dilutive capital or subsidy. The plan says that financial support for SMEs will be “adapted and intensified” “in order to encourage investment projects in sustainable technologies.”
Additional financial instruments are in the pipeline. The report outlines: “the SNCI, in collaboration with the Mutualité de Cautionnement, will set up a new instrument combining SNCI financing and Mutualité guarantees. The SNCI will be able to intervene at the level of permanent funds by means of a start-up loan covered by a guarantee from the Mutualité and, if desired, at the level of bank financing requirements. The instrument is available to the Mutualité des PME under the same conditions.”
New financing models are being considered such as “the possible introduction of new financing models such as loans between individuals, tax shelters or tax credits to facilitate investment in higher-risk projects and reduce Luxembourg’s current financing deficit.”
And the plan outlines plans to analyse the creation of a fund enabling young people with a financing requirement of less than €10,000 euros to be granted a loan at a favourable rate. These proposals, once implemented, will complement the €2k grants for first-time founders active in the trade and craft sectors, announced earlier in July 2023.
Skills & Training
The eighth tenet rests on creating an environment conducive to research and innovation in order to boost SME competitiveness. One barrier is raising awareness among company leaders about the possibilities for digitalisation. The plan proposes the reintroduction of an annual Tech Days event to do this.
Another major barrier is the tech skills shortage. The European Commission last year reported that three-quarters of EU employers had difficulty hiring qualified staff, while four out of 10 adults in the EU lack digital skills. The plan covers this talent gap in point seven, which it calls for efforts to align training to SME business needs.
It proposes to do this by developing a national skills strategy, leveraging funds like the employment fund, European Regional Development Fund, Just Transition Fund and Climate and Energy Fund to co-finance ongoing training, particularly in relation to the development of skills linked to the energy transition.
Last Push Before Elections
There are no guarantees that all elements of the national SME Plan will be fully implemented. Never mind the fact that many elements echo the points laid out in the fourth plan, the latest report comes three months before Luxembourg’s legislative elections, the outcome of which will play a fundamental role in guiding SME politics in future.