Home > Italian economy, Italian news > Tough times for Italy’s family businesses

Tough times for Italy’s family businesses

December 2, 2010

By Guy Dinmore and Giulia Segreti, Published: December 2 2010

Riding her scooter through freezing Milan, Anna Borroni is not the least surprised to hear that a new survey of small businesses – the backbone of the economy – reports worrying trends as Italy slowly emerges from its worst postwar recession.

“Times are really hard. Our recovery is minimal. We are making lots of sacrifices,” she says of her family’s four-employee Biemme company, which designs textiles and imports from India.

Her experiences match those in an annual survey of small and medium enterprises released on Thursday by UniCredit bank, which confirms what many suspected: a worrying deterioration in Italy’s recovery from last year’s economic slump, with access to credit worsening.

Of 6,000 companies surveyed, 28 per cent said they had cut production against 21 per cent who increased output. Exporters, however, are faring better than those who, like Ms Borroni, are focused on the stagnant domestic market. “Confidence seems to be influenced by the intensity of the internationalisation of companies,” said UniCredit. “As turnover related to export grows, entrepreneurs’ positive outlook grows proportionally.”

UniCredit and Confapi, an association of SMEs, reported a “drastic worsening” in access to credit by businesses, with numbers returning to lows not seen since the first half of 2009.

Nonetheless, Roberto Nicastro, UniCredit director-general, insisted that liquidity for enterprises was not lacking. “UniCredit is available, and the Italian banking industry in general is waiting for an increase in the demand for credit,” he said in Rome.

Italian SMEs are defined as those employing fewer than 250 staff. They account for 81 per cent of the private sector workforce – against an European Union average of 67 per cent – and generate more than 70 per cent of national gross domestic product.

Size does matter, according to an earlier survey of SMEs in seven European countries by Bruegel, a Brussels-based think-tank, together with the Bank of Italy and UniCredit. While Italian SMEs are highly export-oriented, they are handicapped by their small size compared with their French and German rivals. The survey calculates that a combination of Italian dynamism and German bulk would boost Italian exports by 37 per cent, or €190bn.

“We don’t have many Microsofts in Italy,” commented Fabrizio Saccomanni, a senior Bank of Italy official, noting the general failure of Italian companies to grow beyond the average of four employees, compared with 12 in Germany.

Bank of Italy figures for the first four months of this year showed some 10,000 companies had started bankruptcy proceedings, a 26 per cent increase over the same period in 2009, with defaults highest among manufacturers.

The Confindustria business association says important support has been given to SMEs by a finance ministry agreement with banks to help arrange debt moratoriums. The scheme is due to expire at the end of next month.

The recession has also compounded the stress that companies experience in the generational handovers, a period during which many fold or merge. Confindustria is urging family companies to hand over management to skilled outsiders and, as an inducement, is lobbying the government to suspend social security payments and taxes.

Ms Borroni, who started taking over from her father last year, says government-imposed payroll costs are prohibitive. “The costs of contributions double the wages,” she says, adding that her purchasing costs in India are also rising.

%d bloggers like this: