The competitiveness of Luxembourg as a headquarters (HQs) destination outstrips many of its global competitors, even as labour availability and high costs weigh on its investment case. The city state has placed first in fDi’s latest assessment of the world’s 100 most competitive locations for regional HQs, followed by Buenos Aires, Argentina; London, England; Istanbul, Turkey; and Mumbai, India.

Reputed for being Europe’s foremost investment management hub and touted as being a possible continental replacement for London after Brexit, Luxembourg has ranked as the best city in which to set up a regional HQ both for overall competitiveness and quality, thanks to its connection to the banking and financial services sector relative to other locations.

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Many IT and financial services businesses have their HQ in Luxembourg, such as Amazon’s European HQ and US private bank Northern Trust's EU bank. Steel giant ArcelorMittal is also headquartered in the city state. 

With good infrastructure and business environment, it is the size and specialisation of Luxembourg’s banking sector that has secured its place as the highest quality regional HQ for foreign businesses. 

Yet the city state ranks 99th out of 100 in terms of labour availability and quality. While renowned as a professional services hub, it has far fewer available skilled staff in areas such as management, consulting services and head office activities than larger cities. 

Regional HQs are necessary for businesses to carry out regional operations. This fDi analysis, which looked at operations with 50 employees across 1500 square metres of office space, illustrates that there are competitive locations on every continent and a mix of representation from developed and developing countries. 

London, Shanghai and Singapore — all of which had received much higher numbers of FDI projects in regional HQs than Luxembourg — garnered the other top spots for top quality destinations. Shanghai, for instance, has the highest number of advertising and business services companies with regional HQs.

Of note, London and Singapore have registered 737 and 656 HQ projects since 2003, according to fDi Markets. The pandemic does not appear to have blunted multinational companies’ appetite for either city — in January, Google said it will buy the Central London development Central Saint Giles for $1bn to house its new HQs. In March, Japanese conglomerate Sony opened a new regional HQ in Singapore and the British tech company Dyson launched a new HQ in the city state.

Buenos Aires ranks as the most cost-efficient city to establish a regional 50-person HQ, with annual operating costs at $1.8m, as well as having the highest number of accountancy companies with regional HQs there. Indian cities Pune, Gurgaon and Bangalore also feature prominently in the top 10 locations ranked by cost efficiency, with annual operating costs ranging from $2m to $2.3m.

Meanwhile, Luxembourg comes in 73rd at roughly $6.4m operating costs, due to expensive labour and residential office space. London ranks 96th on this metric, with $9.1m in operating costs, while New York City ranks lower still at 98th with $9.5m operating costs.  

Besides London and Singapore, FDI projects were biggest in Dubai, Dublin, Hong Kong and Paris. In this regard, Dubai’s overall ranking as 25th is surprising, coming 11th in terms of quality but dragged down by its premium operating costs. Dublin ranks as 38th — while it comes 20th for quality, is pulled down by its 53rd rating for cost effectiveness.

Cities that did not fare so well in fDi’s ranking are those that were not able to offset high labour and office costs with a smaller banking sector, such as Nashville and Raleigh in the US, and Zug in Switzerland.

This article first appeared in the April/May 2022 print edition of fDi Intelligence. View a digital edition of the magazine here.