The high energy cost, in addition to the consequences of the Russia-Ukraine war, the increase in raw material prices and the aftermath of the pandemic, are hitting businesses hard, especially small and very small ones. This is why it is time to act, starting to "put a ceiling on gas and electricity prices and avoiding the speculative phenomena that distort the market". This is what Fausto Bianchi, President of the Small Industry Committee of Unindustria Lazio, claims in this interview with FIRSTonline, a region in which 99,9% of the companies are small companies and is therefore a very significant sample. Let's hear his point of view.
President Bianchi, in recent days the President of Confindustria Bonomi has sounded the alarm about the perfect storm that is hitting the Italian economy amidst war, expensive energy, lack of raw materials, post-pandemic effects and recalled that 46% of companies it even risks closing in June. Lazio, with its 460 SMEs (equal to 99,9% of companies in the entire Region) is a significant mirror of the Italian economy: what is the real state of health of Lazio's SMEs today and for how many really the risk of closure soon?
“If until now we thought that Covid-19 had brought about an unprecedented crisis for our economy, not only in terms of size, but also due to its particularly asymmetric nature, the addition of the Russian-Ukrainian conflict is impacting our small and medium-sized enterprises in an even more profound way and with much greater profiles of uncertainty in the short term. We have observed how the health emergency has had highly diversified consequences, particularly affecting the sectors most affected by the lockdowns and exposed to containment measures such as, for example, tourism, transport, the fashion system, and with a less significant impact or even positively stimulating other sectors such as the pharmaceutical chain, online commerce, the agri-food industry. This dynamic has had its impact, in terms of impact on the territory, above all on the basis of local production specialization: the impacts have been stronger in the regions where the sectors most exposed to the containment measures (the tourism chain, transport, the fashion, audiovisual) weigh more heavily, as evidently in our region. Today, the intensity of the impact on sectors of the war in Ukraine depends significantly both on the duration of the conflict and on the Russian counter-reactions to the sanctions imposed so far. We immediately saw the devastating effects of the increase in costs and the reduction of margins deriving from the high energy prices. Surely the energy-intensive sectors, i.e. those that consume large quantities of energy, are the most exposed to price trends: think of the ceramic industry, excellence of the Civita Castellana (VT) district, or paper mills, cement factories, the chemical sector . Already at the end of 2021, companies in these sectors had received much higher bills than in previous months and had asked the government for economic support. But the situation has worsened after the Russian invasion of Ukraine not so much due to the expected rise in prices as due to their volatility. The first move of many companies has been to limit production to what is strictly necessary, to slow down in the departments that consume the most energy, to ask employees to work even on weekends, when energy is cheaper. When it is not possible to do all of this, companies have been forced to temporarily close entire lines and ask for layoffs. In Lazio, one company out of ten risks stopping due to high bills. But even for those who are not energy-intensive, and are constantly struggling to find raw materials and their costs, the situation is certainly not better. The risk of closure is high if courageous decisions and concrete support for the business world are not taken".
Among the small and medium-sized enterprises in Lazio, which sectors suffer the most and have already had to reduce production or are even at risk of stopping?
“There had already been a significant economic loss in Lazio during the pandemic, over 8 points of GDP, which we managed to recover in 2021. Before the war in Ukraine, we had positive prospects for 2022, with renewed business confidence and investments that could even exceed pre-Covid levels. We now update the downward projections from week to week. From a recent analysis elaborated by the Intesa Sanpaolo study centre, the sectors of Lazio most exposed would be primarily building, construction and infrastructure, penalized by higher production costs due to the high weight of energy and the scarcity of raw materials, with impacts also on downstream sectors, where players with assets in Russia and Ukraine also operate. The impact on agri-food is also significant, as the supply chain is very exposed to the scarcity of raw materials such as wheat and to higher energy costs. Some important players also have on-site production facilities. Without neglecting, last but certainly not least, the textile sector especially as regards luxury, as well as tourism and catering, since the impact for these sectors transits from the importance of exports to Russia which in Lazio is higher to the average figure, and evidently by the weight of tourist flows. We have some positive data on the catering/tertiary sector for the days linked to the holidays that have just ended, but it is certainly good to be cautious for projections for the future. There is also a significant impact in the transportation and medical equipment and biotechnology sectors.”
To deal with the inflation-recession emergency, what proposals does the Small Industry of Unindustria Lazio make to the central government and the region?
“The interventions of the executive still appear too timid, it is not possible to find a true and concrete will to support the entrepreneurial fabric, in particular that of small and medium-sized enterprises. More courage is needed, if one company out of ten risks closing due to energy costs, it is necessary to put a ceiling on the price of gas and electricity, also avoiding those speculative phenomena that distort the market, and not just the energy one. It is necessary to intervene with an attitude in favor of companies, taking as an example what happens in other European countries, such as France and Germany where the price of energy for companies is less than half the market price. We can only ask the Region for more simplification and less bureaucracy. If we want to help small and medium-sized enterprises to grow and become stronger, this is the moment to demonstrate that the Public Administration is also able to innovate and get out of anachronistic dynamics and antagonism towards the private production system”.
In the field of energy, as a Small Industry Committee, don't you also think of saving strategies to avoid downloading all the costs of the high bill on the final consumer?
“We assume that strategies vary from sector to sector. An entrepreneur knows well that, on the one hand, it is not always possible to pass costs on to the final consumer, and on the other, it is a very high risk of leaving the market simply because one is no longer competitive. Let's remember that the PMI also operates in a global market, where by now the geographical borders are not so distant both for those who work in the B2B sector, but not even for those who work in the B2C sector. Therefore, reflection on possible internal saving strategies automatically becomes mandatory. Together with fellow entrepreneurs from Confindustria Alto Adriatico we recently held a workshop on this very topic, i.e. what possible levers we can activate today to reduce costs in the company. There is no magic formula, but three types of activities to focus on in the company are worth mentioning. Eliminate all waste, cutting all activities or the use of resources that do not change the nature or quality of the products and services or that are not necessary for their completion. Reduce as much as possible all ancillary or incidental activities, i.e. those that do not directly add value for the customer but are currently necessary to support processes. Focus on value-added activities, i.e. those that directly change the nature or quality of our product and above all for which our customer is willing to pay".
In line with your background as an insurance entrepreneur, you have set up a program aimed at a new approach to finance especially for SMEs, which are often more fragile in this respect: what exactly are you aiming for?
“The structural dimension of SMEs in Lazio is certainly a majority of micro and micro-small companies. It is necessary to stimulate paths towards a new financial culture. Abandoning models linked to the small is nice, understanding that the markets, investors and all our stakeholders require financial stability, foresight towards new trends and analytical skills. Talking about financial sustainability today may seem almost out of place given the difficulties companies are going through, yet by now there is no credit institution that does not require compliance with ESG parameters. The process we are aiming for is to sensitize the Lazio economic-entrepreneurial fabric towards those virtuous paths that can help small businesses grow. The recent credit agreement with Intesa Sanpaolo which made 10 billion available for our companies in the Lazio region also aims to implement together specific tools to stimulate recovery. During the pandemic crisis, extraordinary solutions were adopted to support Italian companies, now it becomes a priority to facilitate the transition towards structural solutions to support liquidity needs and financial balance, focusing on four crucial axes for growth:
1. Digitization and innovation, encouraging and supporting investment in research, innovation and digitization;
2. Strengthening of the financial structure, promoting the capitalisation, strengthening and rebalancing of the financial structure of companies;
3. Enhancement of the role of the supply chains, enhancing and strengthening the system of local supply chains through new actions with a focus on Sustainable Supply Chains;
4. Sustainability and resilience, supporting the transformation of businesses towards sustainable and resilient models.
All of this, based on the relationship with Intesa Sanpaolo, will translate into concrete actions for our companies thanks to a process of sharing and joint work between the banking world and the entrepreneurial system".
