In the most difficult period of the last century between pandemic, war, drought and supply blockage, the Italian industrial fabric shows well-structured supply chains and resilient businesses, which, should tensions ease, could see good opportunities.
Provided, however, that companies increase their investments in innovation and technology, including green ones, consolidate the size and improve training, governance and skills, also taking advantage of the Pnrr. The future scenario, mainly due to conflict, distribution and prices, is seen as complex and uncertain.
This is the picture that emerges from the fourteenth edition of the Annual Report that the Studies and Research Department of Intesa Sanpaolo dedicated to the economic and financial evolution of industrial districts. The report was presented this morning by Gian Maria Gros-Pietro, chairman of the board of directors of Intesa Sanpaolo, Gregorio De Felice, chief economist and Fabrizio Guelpa, head of Industry & Banking Research.
Exports: historical record in 2021, ok for the first quarter of 2022
The pandemic hit hard on district manufacturing enterprises by registering a drop in turnover of 14,5% in 2020 (at current prices and in median values). But the following year, according to Intesa Sanpaolo estimates, the rebound has come: turnover grew by 25,2%, even exceeding pre-covid levels by 4,3%. Only the fashion system has not yet fully recovered what it lost during 2020.
They were the driving force, with a power never seen before exports which in 2021 came close to 133 billion euros, a new historical record, and which in the first quarter of this year still show a +19,3% (+16% compared to 2019) with peaks exceeding 20% in many regions: Lombardy saw the best performance (+25,5%), closely followed by Umbria (+25,2%), Friuli-Venezia Giulia (+24,5%), Puglia (+24,1%), Tuscany (+23,3%).
I sectors that have seen the best performances in this area are metallurgy, household appliances and food
Industrial districts: 845 champion companies are the driving force
There is a core of leading businesses across the districts that have proven resilient during the pandemic. It's about 845 district enterprises, equal to 4,7% of the total, which grew during 2020, recorded good levels of Ebitda margin (over 8%) and a degree of capitalization of over 20%.
These particularly resilient companies, which also increased the number of employees between 2018 and 2020, are more widespread among medium-large subjects and in some sectors such as means of transport, agri-food, mechanics and intermediates. The largest number of champion companies is located in Lombardy (262) and Veneto (208), while Trentino-Alto Adige (9,2%), Campania (6,4%) and Puglia (6%) stood out for incidence.
Here is the ranking of the best Italian industrial districts
This year in the top three of the ranking of the best Italian industrial districts the Agricultural machinery of Padua and Vicenza, the Camperistica of Val d'Elsa and the Agricultural machinery of Reggio Emilia and Modena are positioned.
Followed by the plastic materials of Treviso, Vicenza Padova, the wines of Langhe Roero and Monferrato, the nursery gardening of Pistoia, the food of Parma, rubber of Sebino Bergamasco, taps and valves of Cusio-Valsesia, mechatronics of South Tyrol, taps and valves , Cookware from Lumezzane, Sardinian dairy products, Meats and cured meats from Cremona and Mantua, Boating from Viareggio, Mechatronics from Trento, Rubber and plastic materials from Varese, Cured meats from Parma, Verona meats, Piedmontese hazelnuts and fruit and Campania buffalo mozzarella .
With conflict and commodities gone mad, the picture is complex and uncertain
The war conflict in Ukraine could jeopardize those economic and financial balances so carefully stitched during the pandemic crisis.
“The Russian invasion of Ukraine has profoundly changed the macroeconomic scenario, which is complex and uncertain. Businesses are found to operate with volatile commodity prices and high" says the report which also underlines the "at least momentarily disappearance of the Russian and Ukrainian market which for the Districts in 2021 was worth 3,2 billion euros, 2,4% of the total".
The hope is that we will arrive at a regionalization on a continental basis of the global value chains: in this case the supply problems triggered by the pandemic and then amplified by the Russian invasion would be mitigated and opportunities could open up for the Italian districts thanks to the presence of structured supply chains and a good nucleus of resilient businesses.
In terms of value the most exposed regions they are Veneto (805 million euros), Lombardy (771 million) and Emilia-Romagna (531 million). In terms of incidence, Umbria (10,8%) and Marche (5,7%) stand out, followed at a distance by Abruzzo (3,1%).
The strengths of industrial districts
On the one hand, the report highlights the importance of centrality of the production chains as a factor of competitiveness in the coming years: “In the Districts the average distance of supplies is very limited, although it increased during the pandemic: in 2021 it was 116 kilometres, 24 less than in non-district areas. The average number of suppliers per company is higher (29 vs 25)” underlines the report.
On the other hand, the ability to control foreign markets which historically present greater internationalisation, measured by the number of foreign subsidiaries (29 for every 100 companies vs 19 in non-district areas) and by the share of companies that export (62,1% vs 52,2%). The Districts are also well positioned in terms of patent capacity, with 70,7 patents for every 100 companies; non-district areas stop at 51,5.
The Pnrr to improve production processes and trade
For the Italian economic system the Pnrr represents a unique opportunity, says the report: it can help to relaunch the propensity to invest, to improve production processes and the commercial phase thanks to the improvement of technologies. But it can also be a support for people and skills, for the search for new solutions, for the circular economy and renewable sources.
In particular, the Pnrr devotes much attention to the relationship between school and business, to the relaunch of basic and applied research and, with regard to sustainability and the green, there is the promotion of energy communities very recent phenomenon with high potential especially in the Industrial Districts, given the high levels of sharing of the energy produced that can be achieved and the higher energy intensity in the Districts (4,1% of energy-intensive companies vs 3,0%)
The challenges: investments, skills and governance
The strengths of the Districts represent crucial resources, but not sufficient to face the difficult economic context that is emerging, says the report.
“The district supply chains will be able to continue to represent a factor of competitiveness only if the players that compose them are able to renew themselves and strengthen their strategic relationships, through an acceleration of investments in innovation and technology, including green ones, a dimensional consolidation and the training and introduction of new skills in the company”.
It is true that in some sectors of the North-East with a high district vocation, such as agro-food, wood-furniture and mechanics, an acceleration in the adoption of Industry 4.0 technologies has emerged since 2017. However, this concerns mostly medium-large companies: three out of four have adopted 4.0 technologies. Instead, only one in five of the micro companies acts in this direction.
Also on the environmental front more can be done: in a sector such as wood-furniture with a high district intensity, in the last three years just under one out of three companies has purchased efficient machinery that reduces energy consumption. It even drops below 6% when considering the share of companies that have made investments in plants for the production of electricity from renewables or for the production of thermal energy from renewables or cogeneration and/or heat recovery.
Another area for improvement concerns the governance and skills. In the two-year period 2020-21, the process of generational renewal seems to have slowed down: the share of district businesses that have made changes to their board has, in fact, dropped to 13,2% in 2020 and to 12,2% in 2021, after which between 2016 and 2019 had always been well above 14%, still remaining higher than in non-district areas.
Gros-Pietro: "Let's learn to take advantage of the changes"
Gros-Pietro intervened during the presentation of the report underlining that it is true that we are faced with great changes, but on the one hand we must prepare to live with them, on the other we must also try to take advantage of it.
The fundamental question is: will small companies make it through this difficult period? Certainly companies must focus on investments, increase production and also improve the financial structure, as they have been doing for years. In this context, the president of the Milanese institute underlined that the problem is not liquidity, which is already at a good level in the Italian system. If anything iThe problem concerns the use of this liquidity which could be used for investment. But in this case the companies highlight the lack of clarity in the directives and perspectives. "Our bank - he concluded - is very present and alongside Italian companies, both through disbursements and with the training of managers and of the companies themselves to help them and informally about the use of the opportunities that will be offered by the Pnrr".
De Felice, after underlining the good performance of Italian companies in 2021 and at the beginning of 2022, underlined that even the whole of 2022 could see, despite the current crisis, a turnover that will remain in double digits, probably above 10%. The economist also highlighted that the Italian economy is better than the German one, both due to the fact that it has a shorter supply chain and because Italian companies, which are in the medium-high range, are able to transfer at least part of the upstream cost increase on the final prices.
De Felice then illustrated the possible geopolitical perspectives. "We are moving towards a new globalization," he said. “We could see a bipolarisation with the USA and Europe on one side and China and Russia on the other. Or a new, more fascinating centre, centered on Europe, with the Mediterranean Sea at its center and Africa to the south: in this way, Italy's role would once again be central and important, while Africa too, with its resources, could be of great support to economies especially in the field of renewable energies”.
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