CONFINDUSTRIA-CERVED: SME WITHSTANDS SHOCKS, ALBEIT WITH SIGNS OF SLOWDOWN. PNRR CRUCIAL FOR RECOVERY
Turnover and added value to grow in 2022, increased cost of debt weighs heavily
 

Rome, 28 June 2023 - The Rapporto Regionale PMI 2023, produced by Confindustria and Cerved in collaboration with UniCredit, takes an in-depth look at the structure and evolution of the health of Italian SMEs from a territorial perspective. The report analyses the profit and loss accounts of around 160,000 Italian SMEs, based on final balance sheet data for 2021 and offering estimates for 2022, using Cerved's economic-financial predictive models.
 
The data highlight the different impacts on territorial SME systems of the sequential shocks that have hit our economic system in recent years. On the income statement front, turnover (+2.4%), value added (+1.4%) and EBITDA (+2.9%) are estimated to be substantially stable, recovering 2019 levels (+9.1%, +8.7% and +14.9% respectively). These indicators are accompanied by less encouraging evidence, suggesting a possible trend reversal in the next two years. The signs of slowdown are more significant in the Centre-South areas and suggest an increase in the structural gap between the northern and southern production systems.
 
The first effects of inflation and the rising cost of debt cause the net profitability and profits of SMEs to contract. In 2022, ROE is estimated to decrease by 0.6% (from 12% to 11.4%). The reduction in profitability is more pronounced in the Centre (from 11.4% in 2021 to 10.4% in 2022) and in the South (from 13% in 2021 to 12.2% in 2022), with the North-East and North-West suffering less (from 12.5% in 2021 to 12.1% in 2022 for the North-East and from 11.5% to 11.1% for the North-West). In parallel, the share of Loss-making SMEs increases from 12.2% in 2021 to 27.9% in 2022, with more significant effects in the Centre (+16.4%; from 13.4% to 29.8%).
 
The worsening economy also has an impact on the payment behaviour of SMEsNon-payments are expected to rise by 4.3% at national level (they are 29.4% of invoices in December 2022 compared to 25.1% in December 2021). However, the highest values are reached in the South (39.6%; +5.8% on an annual basis) and in the Centre (32%; +2.9% on an annual basis). Non-payments were lower in the North-East (22.7%; +3.5%) and in the North-West (27.2%; +4.6% over the year). Signs of a trend reversal can also be seen among the financial stability indicators.
 
The report also monitors the evolution of SME market exit. The 2022 estimates confirm the continuation of the freeze in closures observed since 2019; bankruptcies fall by 34.7% year-on-year (661 in 2022 vs 1013 in 2021) and non-bankruptcy proceedings by 49.4% (from 330 in 2021 to 167 in 2022). The drop in bankruptcies is particularly marked in the South (-45.2%, from 230 to 126) and in the North-West (-42.2% from 341 to 197), while non-bankruptcy proceedings are particularly reduced in the North-East (-60.2%) and the Centre (-55.3%).
 
The Report comes at a complicated time for Italian SMEs: the persistence of inflation well above its mandate targets is prompting the ECB to continuously and decisively raise ratesThis has an impact on the cost of business financing and, indirectly, on the credit requested and credit granted, as well as on investments. After almost eight years of interest rates on main refinancing operations below or equal to 0.25 points, in one year (since July 2022), 4.00 points have now been reached. The corporate restructuring processes of the last ten years, although incomplete and differentiated between sectors and territories, had made the Italian production fabric more solid. However, the crisis that characterised - and followed - the lockdown periods caused companies to take a 4-year step backwards in the balance sheet strengthening process observed in the 10 pre-crisis years. This affected SMEs in particular.
 
In the face of these difficulties, the challenges for the future also increase. The twofold transition, which is now unavoidable, requires significant investment at all levels of the supply chain, as well as skills appropriate to the objectives. Both the market and increasingly stringent rules are forcing SMEs to change their processes, which in turn requires more managerialisation, more training and more investment.
 
In this context, helping businesses to grow requires a coherent, medium- to long-term economic and industrial policy design that acts first and foremost correcting the structural weaknesses faced by SMEs and through targeted incentives that solve or cushion the main deficits.
 
In order to achieve these objectives and overcome the critical issues that hamper business competitiveness, the PNRR is a historic opportunity. The first action that the PNRR must support is the implementation of reforms: of labour, including active policies; of the education system; of the justice system; and of the tax system. In addition to reforms, the PNRR plays a central role in the implementation of investments to support competitiveness, not only of the entrepreneurial system, but of the entire territory. Both reforms and investments now need a decisive push towards implementation. On the investment front, in addition to structural delays, there is a situation of uncertainty, mainly related to the issue of 'remodelling'.
 
The first opportunity to update the Plan is REPowerEu. Priority should be focused on interventions to be implemented with automatic tools, which can, on the one hand, support companies in coping with the costs of transformation green eon the other hand, foster the framework conditions that support this process, including investment in digital and skills necessary in this respect.
 
With regard to digitisation, there is a need for a review and enhancement of the tools supporting the digital transformation of businesses, taking into account the changed objectives of Industry 5.0 and building on the experience of the 4.0 plans. Furthermore, the so-called '4.0 innovation network', consisting of Competence Centres and Digital Innovation Hubs, which are able to support smaller companies in analysing their needs and identifying and applying the most suitable digital technologies, remains of fundamental value for SMEs.
 
Another line of action relates to the areas of research and innovation. SMEs face significant challenges when it comes to bearing the costs of research and development activities. On the other hand, due to their flexible structure, they are able to absorb process and product innovations more easily, even if these have been developed elsewhere. In this sense, particularly welcome is the 'tax credit for investments in research and development', a national incentive with a bonus for companies located in the South.  
 
Financially speaking, The rise in interest rates is now leading to a reduction in demand for loans by companies and significantly more restrictive conditions for access to credit. This creates a series of financial strains on companies, which have taken out variable-rate loans and got into debt to cope with the crisis of the last three years. In this context, action is needed to ensure the sustainability of companies' outstanding debt, favouring operations to renegotiate and extend financing, including moratoria. However, this requires changes to European banking rules (in particular the definition of default), which discourage such operations. The temporary European aid rules also need to be revised to allow an extension of the duration of existing and new state-guaranteed loans.
 
Public guarantees must also be strengthened. In particular, with regard to the Guarantee Fund for SMEs, action should be taken to provide free access for all financial transactions, increase guarantee coverage and raise the maximum guaranteed amount. The worsening credit conditions reinforce the need for SMEs to make greater use of alternative financeopening up their capital to outside investors. For this, an integrated set of measures is needed, capable of reaching the different types and size classes of companies and increasingly activating private savings. To do this, it is necessary for companies to develop greater capacity to communicate to the market and adequate governance, which can be achieved, again, by strengthening their level of managerialisation.
 
Finally, the revision of the national incentive system, initiated by the government, is agreeable in its ratio backgroundThis means reshaping the system using a few simple tools, leveraging those facilitation schemes that, in practice, have already proven to work effectively (e.g. SME Guarantee Fund, Nuova Sabatini, FRI), adapting them, also with the support of the Regions, to the different and specific strategies and needs.