2015 SBA Fact Sheet Italy

Transcription

1 2015 SBA Fact Sheet Italy Key points Past & future SME performance: 1 In terms of value added and jobs, SMEs play a more significant role in Italy than in most other EU countries, but their productivity, measured as value added per capita, is approximately 10 % below the EU average. The non-financial business economy has not yet recovered from the crisis. SME value added in 2014 was still about 10 % lower than in SME employment has dropped by approximately 9 %, and the number of SMEs has fallen by almost 4 %. However, by the end of 2014, more than 6 million companies are registered in the non-financial business economy an increase of approximately 0.5 %. The outlook for SMEs is not positive. Their value added is expected to fall by 2 % in In particular, by 2016, SME employment is expected to drop by another 4 % compared with Implementing the Small Business Act for Europe (SBA): In seven out of nine SBA areas, Italy performs below the EU average. Only in the areas of skills & innovation and internationalisation its performance is in line with the average. Since the beginning of the SBA in 2008, Italy has consistently improved results in the areas of responsive administration, skills & innovation, and particularly in single market. All other areas have remained more or less stable. The most critical areas remain access to finance and state aid & public procurement. SME policy priorities: On access to finance, despite recent efforts, Italy needs to diversify funding options for companies and to bolster the banking sector s resilience. More effort on administrative simplification is necessary. Inefficiencies in public administration weigh heavily on Italy s competitiveness. Payments and bankruptcy procedures take too much time. The management of EU funds, particularly in southern Italy, needs to be improved, and corruption must be fought. Public procurement should be improved in a systematic way by applying central purchasing and e-procurement. About the SBA fact sheets The Small Business Act for Europe (SBA) is the EU s flagship policy initiative to support small and medium-sized enterprises (SMEs). It comprises a set of policy measures organised around 10 principles ranging from entrepreneurship and responsive administration to internationalisation. To improve the governance of the SBA, the 2011 review of it called for better monitoring. The SBA fact sheets, published annually, aim to improve the understanding of recent trends and national policies affecting SMEs. Since 2011, each EU Member State has appointed a high-ranking government official as its national SME envoy. SME envoys spearhead the implementation of the SBA agenda in their countries. Internal market, industry, entrepreneurship and SMEs

2 Table of Contents 1. SMEs basic figures SBA profile SBA principles Think Small First Entrepreneurship Second chance Responsive administration State aid & public procurement Access to finance Single market Skills & innovation Environment Internationalisation Interesting new initiative SMEs basic figures Number of enterprises Number of persons employed Value added Italy EU-28 Italy EU-28 Italy EU-28 Number Share Share Number Share Share Billion Share Share Micro % 92.7 % % 29.2 % % 21.1 % Small % 6.1 % % 20.4 % % 18.2 % Medium-sized % 1.0 % % 17.3 % % 18.5 % SMEs % 99.8 % % 66.9 % % 57.8 % Large % 0.2 % % 33.1 % % 42.2 % Total % % % % % % These are estimates for 2014 produced by DIW Econ, based on figures from the Structural Business Statistics Database (Eurostat). The data cover the non-financial business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N), but not enterprises in agriculture, forestry and fisheries and the largely non-market service sectors such as education and health. The advantage of using Eurostat data is that the statistics are harmonised and comparable across countries. The disadvantage is that for some countries the data may be different from those published by national authorities. SMEs are essential to the 'non-financial business economy' in Italy, as they generate almost 67 % of value added and 80 % of all jobs. Compared with the EU average, their share of value added is 10 percentage points higher, and their share of employment is higher by 13 percentage points. Micro firms (0-9 employees) produce 30 % of value added, a larger percentage than in other EU countries. However, SME productivity, measured as value added per capita, is approximately 10 % below the EU average. The manufacturing sector is the highest contributor to SME total value added, with 31 %, against an EU average of 20 % for that sector. However, SMEs in the professional activities, information and communication, and administrative activities sectors all provide a lower share of total SME value added compared with their respective EU averages. The same holds for their share of SME employment, although manufacturing leads the non-financial business economy by providing more than a quarter of all its jobs. The 'non-financial business economy' has not yet recovered from the crisis. SME value added in 2014 was still about 10 % lower than in 2008: value added has increased by only 6 %. SME employment has fallen by approximately 9 % since the crisis. The number of SME businesses has dropped by almost 4 %, mainly due to a fall of approximately 12 % in the number of businesses with employees. The information and communication sector is still far from a full recovery. Over the period , SME value added in this sector dropped by almost 3 %. It has fallen annually by about 0.5 % since the crisis. SME employment and the number of SMEs have dropped by approximately 10% and 5 % respectively. Italy has always lagged behind in the use of IT because of unfavourable infrastructure conditions and excessive taxes and government regulations. There has also been a fall in public demand and investment since , 3 The Italian Digital Agenda 2015 SBA Fact Sheet Italy 2

3 came into effect in 2012, but delays in implementing it have had a dampening effect on sectoral expectations and performance. 4 The manufacturing sector has experienced a greater degree of positive developments since the crisis. SME value added has already increased by 8 % since However, since 2009, SME employment and the number of SME businesses have fallen by approximately 10 % and 6 % respectively. With a turnover of EUR 132 billion in both 2013 and 2014, the food industry has been contributing steadily to the growth of manufacturing. The Italian Trade Commission has launched a number of initiatives to promote food products abroad, and to facilitate links between Italian companies and international buyers. These include Cibus and TUTTOFOOD, which were the result of a 2014 roundtable between food companies and the government, and the 2015 Made in Italy promotion plan, 5, 6 which will provide the food industry with support totalling EUR 130 million..7 In addition, the competitiveness of Italian businesses has increased in recent years, with approximately 52 % of food manufacturing businesses making use of innovative technology and spending on R&D. 8 The negative developments in the 'non-financial business economy' are not a true reflection of developments in the business demography. Since the crisis, the number of new businesses has fallen. In 2014, there were newly registered businesses, compared with in However, the number of liquidations has also fallen since 2010, to in This represents a net gain of over companies. As a result, by the end of 2014, there were more than six million registered companies in the non-financial business economy. This is an increase of approximately 0.5 %, more than double the rise in the previous year. 9 This slightly positive development reflects expectations of entrepreneurs and stakeholders, who see the possibility for a re-launch of the economy during , 11 The reason the business demography has remained stable during recent years is most likely the introduction in 2012 of so-called SRL-Light companies (simplified & reduced capital limited liability companies). This new legal form aims to encourage entrepreneurship by bringing down bureaucratic barriers. They require only one euro of capital. Entrepreneurs are also able to register limited companies with less than EUR in capital. 12 The result has been an increase in limited companies in , outweighing the fall in the number of businesses for other legally constituted companies. 13 The outlook for SMEs in the non-financial business economy is not positive. Value added is expected to fall by 2 %, and employment to drop by another 4 % in SBA profile 14 stable. By contrast, the areas access to finance and state aid & public procurement have seen the greatest deterioration: Italy ranks last but one for both of them. These two areas give most cause for concern. Italy was one of the first EU countries to approve the SBA and to transpose it into national legislation. The importance given by the government to the SBA was also reflected in the explicit allocation of roles and responsibilities at national level for the SBA implementation process, and in the design and launch of various ad hoc measures. In addition, the establishment of an internal monitoring system, composed of various complementary instruments, is a clear sign of the interest and involvement of the Italian government in applying the SBA. Italy s SBA profile remains weak. In seven SBA areas, Italy performs below the EU average. Only in the areas of skills & innovation and internationalisation does the country perform in line with the average. Since the beginning of the SBA in 2008, it has consistently improved its performance in the areas of responsive administration, skills & innovation and particularly in the single market. All other areas have remained somewhat Over the reference period 2014 and the first quarter of 2015, Italy adopted 16 policy measures addressing seven SBA areas. The areas that saw the most important progress were skills & innovation and internationalisation. The area of access to finance has also seen progress over this period. Among the most notable policy measures are those on skills & innovation, including a measure to define the category of innovative SMEs and offering a wide range of incentives to facilitate their development and growth, and a tax credit to stimulate investments in new equipment and machinery. In addition, a patent box measure has been launched; this provides for the preferential taxation of income derived from the use of 2015 SBA Fact Sheet Italy 3

4 intangible assets in the field of R&D. It aims to bring back to Italy patents held abroad and to encourage investments in R&D. In the area of internationalisation, a fully fledged plan to promote the internationalisation of Italian firms and to attract investments in Italy has been launched. The plan, which has a budget of EUR 232 million for the period , consists of a mix of actions to be carried out both in Italy and abroad. Finally, in the area of access to finance, the latest measures aim to ease the access of SMEs to credit, to improve the capitalisation of firms and to liberalise the credit market. The Italian government has adopted a national strategy to implement the SBA. The Ministry of Economic Development's department for industrial policy, competitiveness and SMEs (Direzione Generale per la politica industriale, la competitività e le piccole e medie imprese) is the body responsible for the implementation of programmes and policies in favour of SMEs, monitoring the implementation of the SBA, and supporting the SME envoy. In particular, it has a mandate to draft proposals to implement the Annual SME Law, to prepare the annual report on the state of implementation of the SBA, and to coordinate the standing committee for SMEs. A draft version of the Annual SME Law was drawn up for the first time in June Despite several amendments and delays, it appears that there is now the political will to bring it forward. By gathering policy intelligence from SMEs and entrepreneurs, the Italian SME envoy is playing an important role in the process of designing policy. He maintains close relationships with national business associations and chambers of commerce and helps to apply the think small first principle by defending SME interests and raising awareness about their concerns. According to a recent Ministry of Economic Development survey on a representative sample of SMEs, high taxation, the burden of bureaucracy and restricted access to credit were the main problems faced by Italian companies. 15 Having clear rules and operating in a climate of certainty would be essential for business community. A large number of entrepreneurs need to have access to credit because of the lack of liquidity. Long procedures, uncertainty regarding the acceptance of credit requests and substantial guarantees are cited as the major obstacles encountered. While it is true that several difficulties have recently been addressed (e.g. reductions in labour and energy costs, support for SME internationalisation efforts, reduction of bureaucracy), the difficulties raised by companies year after year basically remain unchanged. Although the SBA has received a great deal of attention at policy level since its introduction, it is however less familiar to companies. In addition, some barriers still hamper the SBA implementation. These include the frequent bias in policy measures that advantage mostly medium and large enterprises, the limited attention paid to micro enterprises, and the inadequate ex ante and ex post evaluation of the effects of policies on SMEs. Further hindrances are to be found in the degree of compliance with regulations and constraints by other parties (for example, banks and credit institutions are subject to compliance with certain requirements, which in turn limit the access to credit for SMEs) and the fact that the policy measures in place mainly support start-up companies. There should be more measures aimed at supporting company growth and development SBA Fact Sheet Italy 4

5 SBA performance of Italy: state of play and development from 2008 to SBA Fact Sheet Italy 5

6 3. SBA principles Think Small First The think small first principle is meant to be a guiding principle for all policy- and law-making activities. It requires policymakers to take SME interests into account at the early stages of the policy-making process. The principle also calls for newly designed legislation, administrative rules and procedures to be made simple and easy to apply. In the reference period, one new measure was launched in this area with particular attention to micro enterprises. They will benefit from a reformed tax and social contribution regime, the so-called dei minimi regime. An important step forward was made with the Annual SME Law, which was proposed under Article 18 of the 2011 'Statute of Enterprises' but which had not yet been fully implemented in practice. A first version of the law which should identify specific policy actions that the government will implement each year in order to meet its SBA priorities was presented in June 2014 and is currently open for consultation. In the policymaking process, Italy has been traditionally more focused on consultation rather than on evaluation and monitoring. Business organisations are consulted before the approval of regulations or administrative rules. Provisions under the 'Statute of Enterprises' (Statuto delle Imprese) place a major emphasis on the role of SME and entrepreneur associations in policy formulation. According to Confindustria, the main association representing manufacturing and service companies, the consultation process has been quite positive in the last few years, which have seen a constant dialogue between policymakers and business representative organisations. This process can be improved by also including smaller SME stakeholders. Article 6 of the Statute of Enterprises (art 6) requires regulatory impact assessments to be undertaken on any proposed new government regulation that may affect SMEs or entrepreneurs. Governments and public bodies at national, regional and local level must assess the need for the new regulation, its expected impact on small businesses, and the alternative options available. Any new burdens on business must take into account company size, the number of employees and the business sector. In addition, one of the roles of the SME Envoy is to analyse ex ante and ex post the impact of regulation on micro enterprises and SMEs, and to inform the relevant institutions in cases where laws or administrative measures may result in additional costs or administrative burdens on the businesses concerned. Last but not least, the 2014 stability law (Legge di Stabilità) launched the requirement of a regulatory impact assessment for any new legislation having a potential major impact on businesses. In addition, a working group (POAT DAGL) 18 has recently presented a document on the SME test in which a detailed proposal for the implementation of this test is put forward. However, in practical terms, the SME test has not yet been systematically applied at national level. At regional level, the Marche region is taking the lead and is currently experimenting the SME test and planning to apply it as of March As regards the enforcement of existing laws, the current administrative supervision risks damaging relations between public administration and businesses. The country is characterised by a redundant, complicated and fragmented regulatory system that is detrimental to compliance and costs. Given the industrial structure of the country, which is predominantly made up of SMEs, Italian governments have always declared their interest and orientation towards the safeguard and promotion of SMEs. Think small first is, therefore, the underlying guiding principle in policymaking. However, in practice, when policy is translated into specific measures, the beneficiaries of these measures often turn out rather to be medium and large enterprises instead of small and micro companies. As for policy measures, the government should ensure that all the steps from design and implementation to evaluation and review are carefully followed. The approval of the Annual SME Law and the establishment of effective mechanisms for evaluation of regulatory measures, including the 'SME test', should be a policy priority SBA Fact Sheet Italy 6

7 3.1 Entrepreneurship Italy s performance in entrepreneurship remains below the EU average. Compared with the situation of last year, there was considerable improvement. Further efforts are needed, but the country is heading in the right direction. Compared with its own results from last year, early stage entrepreneurial activity rose from 3.4 % to 4.4 % the related indicator for female early stage entrepreneurial activity rose from 2 % to 3.1 % and established business ownership increased from 3.7 % to 4.3 %. The biggest improvement, from 18.4 % to 38.6 %, was for opportunity-driven entrepreneurial activity. Entrepreneurial intentions improved only slightly from 9.8 % to 11.4 %. The remaining indicators remained more or less unchanged as compared with the previous year. Since 2008, Italy has been lagging a long way behind a situation that seemed destined to remain permanent. However, the clearly perceivable jump in the scores from last year to this year should encourage policy actors to carry on with their commitment. With this spirit, three new measures were implemented in the reference period and are expected to deliver positive outcomes: 1) The Jobs Act is a government measure to reform the labour market, in particular issues relating to work, welfare, unemployment benefits, pensions and employee turnover. The measures contained in the Jobs Act aim at reducing segmentation in the labour market and encouraging permanent employment without increasing costs for small businesses. 2) The Smart & Start measure with a budget of EUR 200 million aims to support the establishment of innovative start-ups with high technological content. The measure offers a 0 % interest rate to finance technical and management coaching services. The maximum eligible funding percentage increases if the start-up is composed exclusively of women or people under 35 years of age, or if one of the participants is an Italian PhD working abroad. 3) A sector-specific measure supports entrepreneurship in agriculture through three different incentives. One provides a tax deduction of 19 % for the cost of renting farmland. Another offers an incentive equivalent to one third of the gross salary for a maximum period of 18 months to hire young workers on a permanent full-time contract. It also includes fixed-term contracts as long as they last at least three years. The annual value of the incentive cannot exceed EUR for fixed-term workers and EUR for permanent ones. The third incentive envisages a tax deduction of 40 % for expenses incurred in the realisation of infrastructures to boost electronic commerce SBA Fact Sheet Italy 7

8 3.2 Second chance Second chance refers to ensuring that honest entrepreneurs who have gone bankrupt get a second chance quickly. In this area, Italy performs well below the EU average. There has been no perceivable progress over the years. Compared with last year, there have been no major improvements. All indicators both for Italy and for the EU were stable compared with the previous reference period. The most troublesome issue for Italian SMEs remains the costs of resolving insolvency. Italy's results are habitually among the worst in the EU. On policy, Italy has in recent years remodelled the institutional framework of the bankruptcy law, dating from It was revised in three main areas: arrangements with creditors, debt restructuring agreements and action plans. In 2011, the court judgment No provided for the complete discharge under certain conditions of the entrepreneur s debts in the event of non-fraudulent bankruptcy, even if the company is still in debt. In 2013, a measure was launched in favour of cooperative firms formed by employees who want to purchase a company that is subject to bankruptcy proceedings. In recent years, because of the financial and economic crisis, the bankruptcy law has often had to be applied. Official data confirm that bankruptcies, voluntary winding-up proceedings and other insolvency procedures have increased. The time frame of these procedures is still quite lengthy: for bankruptcy, the appellate court has ruled that a reasonable limit for this type of procedure should be seven years. As for the complete liberation of debts, a maximum time frame is not envisaged. Information campaigns and assistance to businesses in the process of restructuring and recovery have not been institutionalised. In order to reduce the stigma of failure, the register of bankrupts (registro dei falliti) has been discontinued. Under the comprehensive package of support measures and incentives launched by the Italian government to support innovative start-up companies (see section 4), one measure concerns procedures to facilitate and accelerate burdensome insolvency procedures that are set in motion when the start-up does not take off ( fail-fast measure). In relation to business culture, the predominant negative attitude towards second chance is tackled by awareness-raising campaigns to showcase successful entrepreneurs who have previously failed. However, no new measures were launched in the reference period SBA Fact Sheet Italy 8

9 3.3 Responsive administration Responsive administration refers to public administration being responsive to the needs of SMEs. In this area, Italy performs well below the EU average but, since 2008, has been showing a slight improvement. In comparison with the previous year, neither Italy nor the EU average saw any remarkable shifts for most indicators. The only movement of note and it is negative relates to the costs of starting a business, where Italy lags behind all other EU countries and where no improvement was achieved. In contrast, other Member States improved their scores, which made Italy trail even further behind. Such a situation also occurs in the time it takes to pay taxes, with Italy s score having stayed stable while the EU average improved slightly. The opposite is the case for the paid-in minimum capital, which Italy decreased to zero and for which results in other countries deteriorated slightly, thus constituting the biggest improvement for Italy under this principle. Finally, the composite index for the level of burdensome bureaucracy saw a manifest decline. This index sums up the never-ending problem in Italy: inefficiencies in public administration weigh heavily on Italy s competitiveness and they also hamper the implementation of new reforms. The Italian business environment suffers from cumbersome and lengthy procedures. The inefficient management of EU funds in southern Italy, and the unclear coordination of responsibilities among the various government departments, are also detrimental to public finances. Two measures were launched in this area in the reference period. One is the agenda for administrative simplification, which identifies five strategic areas of activity: digital citizenship; health and welfare; taxation; construction; and businesses. The objective for businesses is to reduce the time and costs involved in the launch and operation of business activities and to ensure the simplification of required procedures. The second measure concerns a progressive reduction in the annual fees paid by companies to the chambers of commerce, starting in This measure will reduce the financial burden of companies and free up resources for their growth SBA Fact Sheet Italy 9

10 3.4 State aid & public procurement Italian s performance in this area is the worst of all EU countries. This is mainly due to the serious situation in the area of late payments. It is also worrisome that the administration cannot keep pace with other EU countries and reduce payment delays as fast as they are doing. This worsens the already serious cash flow problem of SMEs. On the policy front, public procurement legislation has been amended to simplify participation in public procurement procedures. Where documents and declarations are incomplete or have other irregularities concerning essential information, the tenderer pays the contracting authority a financial penalty and has 10 days to regularise and complete the necessary declarations. It is also worth mentioning that, under Decree Law 90/2014, the national anti-corruption authority ANAC (L Autorità nazionale anticorruzione) has been strengthened in order to prevent corruption in public contracts. There is still a need for a systematic improvement in public procurement. Using central purchasing bodies could improve public procurement, thereby bringing savings for public finances. The utilisation of e-procurement would most probably have a similar effect. Some regions have put in place their own e- procurement systems. These should be interlinked with each other and coordinated to avoid duplication. The new EU public procurement and concession directives, transposed in April 2014 by national decree, should help to achieve this. This decree included a national reform programme and a measure to shorten delays; an electronic platform was set up as from July All public bodies are obliged to register any outstanding payment. This platform also enables the possibility of e- invoicing. It is expected to be operable as of March 2015, thus reducing costs and increasing transparency SBA Fact Sheet Italy 10

11 3.5 Access to finance Access to finance still remains one of the most urgent problems. In this area, Italy has the second worst performance after Greece. The record has been steadily decreasing since Micro companies in the southern regions and in the tourism and construction sector suffer more than most from restricted access to finance and poor cash flow. A particular concern is the indicator on access to public financial support, which has recently seen a significant deterioration from 17.3 % to 35.6 % from 2013 to The only positive exception with an above-average score and with a slight improvement compared with the previous year is the indicator on bad debt loss, which illustrates the receivables that have to be written off as a consequence of not being paid by private customers. Italy is far behind all other EU countries in terms of payment delays. Cash flow problems of SMEs are caused not only by the public sector, but they are also aggravated by the lax payment practices of customers. The financial crisis led to an erosion of the Italian banking sector s profitability. As a consequence, banks have difficulties in supporting the economic recovery. Given the deteriorated financial health of Italian companies in the wake of the crisis, aggravated by their high dependency on bank loans, their creditworthiness has plummeted, leading to a sharp increase in non-performing loans. Consequently, the profitability of banks has diminished. The Italian government has clearly identified the problems and tried to address them over recent years. Policy measures have been put in place aiming to diversify funding possibilities for companies, to make the private sector more independent of banks, and to improve the resilience of the banking sector. One future problem for banks will be the large number of nonperforming loans that has piled up in recent years. The latest reform of the governance system of the largest cooperative banks has strengthened the capacity of the banking sector to address these non-performing loans. During the reference period, the credit market has been liberalised, allowing insurance companies and securitisation companies to grant loans to businesses. In addition, to encourage lending to businesses, a government decree (Decree Law 21/2014) stipulates that the 12.5 % withholding tax does not apply to interest and other income obtained from medium and long-term loans granted to firms by credit institutions, authorised insurance companies or collective investment bodies. In addition, a Fund of Funds Private Debt has been set up to support the development of an Italian private debt market, dedicated to small and medium-sized enterprises. The fund s objective is to encourage the diversification of funding sources and increase resources used to support SMEs. Furthermore, to reduce costs and improve competitiveness for SMEs, their electricity bill will be reduced, with estimates indicating a 10 % reduction. This is important for SMEs since Italian companies suffer from higher electricity costs compared with their EU counterparts: according to a study by Confartigianato, annual electricity costs for a company located in Italy are EUR higher than for companies located elsewhere in the EU SBA Fact Sheet Italy 11

12 3.6 Single market In relation to the single market, Italy continues to perform below the EU average. A distinct improvement has taken place over recent years, but further steps need to be taken. The main reason for the underperformance is caused by the indicator measuring the number of pending infringement procedures. For this indicator, Italy lags behind all other EU countries. Again, this is a result of the administration s poor performance, which is however offset by the fast transposition of directives. Nevertheless, Italy has been demonstrating a remarkable improvement in the number of pending infringement procedures, which fell from 153 in 2007 to 66 in Sectors with significant numbers of infringements include public procurement (6 cases), indirect taxation, justice and waste management (5 cases each). Noticeable efforts were made to address the issue of directives that were more than two years overdue in transposition: Italy now scores broadly in line with the EU average (down from 14 to 9 in ). Another problem indirectly linked to the single market is the inefficient management of EU funds. Even though a new agency for the management of territorial cohesion was set up to manage the funds, there are still uncertainties about staff and the cooperation with regional authorities. The intra-eu trade indicators of Italian SMEs deteriorated compared with the previous year, but this was mostly a result of improvements in the rest of the EU. On the policy side, no measures were launched in the reference period. However, Italy has already proven over time that it is progressing and should now focus further on complying with single market requirements. The significant number of pending infringement proceedings points to the administration and judicial system being overstretched, with further reforms needed to reduce the current and to avoid new backlogs SBA Fact Sheet Italy 12

13 3.7 Skills & innovation Italy s performance on skills & innovation is in line with the EU average. In recent years, the country constantly improved its scores. Compared with its own results from the previous year, nearly all indicators have improved. For the first four innovation indicators especially, Italy performed much better than previously. Apart from the good innovation results, the share of companies purchasing online increased from around 15 % in 2010 to more than 20 % in Over the same period, sales of new-to-market and new-to-firm innovations fell from less than 15 % to just under 11 %. The use of new technologies to sell their products still appears to be a challenge for companies. As for information and communication technologies, Italy trails the other EU countries. An area in which there remains room for improvement is access to training and skilled employees, as SMEs suffer from a substantial lack of skilled labour. The most wanted profiles are PhDs and highly specialised technicians in the electronic and electromechanical fields. Since 2008, Italy has adopted a substantial number of policy measures in this area to help Italian SMEs to get more involved in innovation. The most important measures launched in the reference period include: 1) Fiscal incentives for investments in new equipment, including a tax credit of 15 % to stimulate investment in machinery and capital goods. 2) The patent box measure, which provides for the preferential taxation of income derived from the use of some types of intangible assets in the field of R&D. This will allow companies to exclude from taxation a percentage of income obtained from the commercial exploitation of intangible assets (30 % in 2015, 40 % in 2016 and 50 % in 2017). The goal is to bring back to Italy patents held abroad and to encourage investment in research and development. 3) A measure that defines and specifies further the category of innovative SMEs, granting benefits and incentives to facilitate their development and growth. Such SMEs will have access to most of the simplifications and the assistance currently reserved only for start-ups, including a reduced burden for setting up a company and access to alternative forms of financing. 4) A five-year-long ( ) tax credit is provided for research investments made by all types of firm. The tax credit is equal to 25 % of the additional expenses in machinery and laboratory equipment vis-à-vis average investment expenditures. It is increased to 50 % for investments in research contracts with universities, research centres, start-ups and the employment of highly skilled personnel SBA Fact Sheet Italy 13

14 3.8 Environment Italy s performance in environment is below the EU average. The main challenges are related to the low level of public support for SMEs taking part in the green economy. The country is on track to achieve its 2020 targets for renewable energy and energy efficiency, which shows that there has been some progress. This could be explained by the shrinking economy and the subsequent lower energy consumption of companies. The government s efforts to combine the 2020 targets with economic policy seem to focus rather on big companies. Possible future problems may be caused by red tape and fragmented regulation at regional and local levels. This could especially affect investments in the construction sector. According to Greenitaly, 22 % of Italian businesses have invested in green energy, leading to a value added of EUR 101 billion and the creation of 3 million jobs since the crisis. Environmental issues have a significant impact on the country. Waste management (particularly in southern Italy), air pollution and insufficient water infrastructure have consequences on public spending, companies and the health of the population. In , industry reduced energy intensity and improved its performance on greenhouse gas emissions and waste production. The potential of SMEs to contribute to this green economy is apparently not yet recognised by the government. The field of environment gives Italy a good opportunity for actions to fight climate change at the same time as implementing actions and incentives for SMEs. In the reference period, one policy measure was implemented, in 2014, reducing the tariffs for feeding electricity generated by solar power or other renewable energy sources into the grid SBA Fact Sheet Italy 14

15 3.9 Internationalisation On internationalisation, Italy ranks in line with the EU average and has held this position consistently over recent years. The extra-eu trade figures for SMEs deteriorated, but taking into account the scale of the crisis that the Italian economy endured this decline could have been even bigger. Other indicators remained stable. Once again, lengthy procedures caused by slow administration are the most burning issue. This hampers the competitiveness of companies. After an improvement in Italy s account balance in 2013, which showed a decline in import demand because of the shrinking economy, the country achieved a surplus in exports, which improved even further in 2014 to reach 2 % of GDP. The government launched a comprehensive plan for the internationalisation of Italian companies. The plan consists of numerous actions to be implemented by the Italian Trade Agency (ICE). It includes a mix of actions to be carried out both in Italy and abroad. In Italy, it envisages among others the promotion of major Italian exhibitions, vouchers for SMEs to strengthen their skills by adopting a temporary export manager, training for export managers, roadshows for SMEs, and an e- commerce platform for SMEs. Abroad, the plan involves agreements with large retailers to support Italian products in foreign markets, actions for entering new foreign markets, and campaigns and roadshows to attract foreign investment. The total budget for the period amounts to EUR 232 million. The Ministry of Economic Development has allocated EUR 130 million for 2015, EUR 50 million for 2016, and EUR 40 million by In addition, the Ministry of Agriculture will support the food industry by allocating EUR 6 million in both 2015 and SBA Fact Sheet Italy 15

16 4. Interesting new initiative Below is an example of a new initiative from Italy to show what governments can do to support SMEs: Start-up innovative Support to innovative start-ups The comprehensive package of support measures and incentives recently launched by the Italian government to support innovative companies is the result of a new approach to industrial policy, focused on fostering development and competitiveness. This new policy approach started in October 2012 with the Decree Growth 2.0, which introduced into Italian law the definition of a new innovative company with high technological value, i.e. the start-up innovative. The approach was pursued in 2015 with the Investment Compact (Decree Law of 24 January 2015), which laid down the definition of innovative SME. Public support to innovative start-ups encompasses a set of new tools and measures to support these companies. They cover not only the start-up phase but continue throughout the entire life cycle to growth, development and maturation. There is no distinguishing of sectors or limiting the age of the entrepreneur, and they offer a novel 360-degree support system. In particular, the incentives and support measures for innovative start-ups include: Exemption from registration fees and administrative duties; Flexible corporate management; Remuneration by means of equity participation; Tax credits for hiring highly qualified personnel; Introduction of tax incentives for investments in start-ups from individuals; Introduction of equity crowdfunding; Easy, free and direct access to the Guarantee Fund for SMEs; Support in the internationalisation process offered by the Italian Trade Agency (ICE); and Fail-fast (procedures that quicken and lighten the process that is set in motion when the start-up does not take off). This system of 360-degree support has seen innovative start-ups registered by 29 June Over a quarter of these are companies created by young people. The companies are small businesses (more than 90 % of them are micro enterprises) with an average of two employees. They operate mainly in the areas of consultancy and software production, scientific R&D, and in industry. More than half of the innovative start-ups are located in the north of Italy. References: SBA Fact Sheet Italy 16

17 Important remarks The European Commission Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW) produces the SBA fact sheets as part of the SME Performance Review (SPR), its main vehicle for economic analysis of SME issues. They combine the latest available statistical and policy information for the 28 EU Member States and 7 non-eu countries that also contribute to the COSME programme. Produced annually, they help to organise the available information to facilitate SME policy assessments and monitor SBA implementation. They take stock and record progress. They are not an assessment of Member State policies. Rather, they should be regarded as an additional source of information to improve evidence-based policy-making. For example, they cite only policy measures national SME policy experts consider relevant. They do not and cannot reflect all measures the government has taken over the reference period. There is more policy information on a database accessible from the SPR website. SME Performance Review: grow-spr@ec.europa.eu Small Business Act: European Small Business Portal: Endnotes 1 The two graphs below present the trend over time for the variables. They consist of index values for the years since 2008, with the base year 2008 set at a value of 100. As from 2013, the graphs show estimates of the development over time, produced by DIW Econ on the basis of figures from Eurostat s Structural Business Statistics Database. The data cover the nonfinancial business economy, which includes industry, construction, trade and services (NACE Rev. 2 sections B to J, L, M and N). They do not cover enterprises in agriculture, forestry and fisheries or largely non-market service sectors such as education and health. A detailed methodology can be consulted at: 2 The Information Technology Report of the World Economic Forum, last accessed Progetto ICON/Informest, last accessed Italian Association for IT (Assinform), and Assinform press releases: last accessed Italian Federation of the Food Industry, Communication 5/02/2015, last accessed CMS, Decree Law 133/2014, last accessed Ibid. 8 ISTAT: Innovazione e competitività delle imprese dell industria alimentare, relazione di R.Monducci 9 Chamber of Commerce, Movimprese-InfoCamere, last accessed SBA Fact Sheet Italy 17

18 10 Chamber of Commerce, Union Camere InfoCamere: Comunicato stampa, last accessed CNA, last accessed Decree Law 1/2012 Article 3.1 and Decree Law 83/2012 Article 44. Introduced in the SME database of policy measures 2012/ Chamber of Commerce, Movimprese-InfoCamere, last accessed The 2015 SBA fact sheets benefited substantially from input from the European Commission s Joint Research Centre (JRC) in Ispra, Italy. The JRC made major improvements to the methodological approach, statistical work on the dataset and the visual presentation of the data. 15 Ministero dello Sviluppo Economico. Direzione Generale per la politica industriale, la competitività e le piccole e medie imprese. Ex-Divisione VIII PMI e Artigianato: Indagine sulle micro, piccole e medie imprese: sintesi dei principali risultati. Roma, 26 Giugno The quadrant chart combines two sets of information. Firstly, it shows current performance based on data for the latest available years. This information is plotted along the X-axis measured in standard deviations of the simple, non-weighted arithmetical average for the EU-28. Secondly, it shows progress over time, i.e. the average annual growth rates from 2008 to These are measured against the individual indicators which make up the SBA area averages. Hence, the location of a particular SBA area average in any of the four quadrants provides information not only about where the country is located in this SBA area relative to the EU average at a given point in time, but also about the extent of progress made between 2008 and All SBA principles, with the exception of the think small first principle for which there is not enough statistical data available, are calculated as composite indicators following the OECD/JRC Handbook guide. For more information on the methodology see Saisana and Dominquez-Torreiro 2015 on the webpage of the SME Performance Review: 17 The policy measures presented in this SBA fact sheet are only a selection of the measures the government took in 2014 and the first quarter of The national SME policy expert that CARSA Spain (DG GROW s lead contractor for the 2015 SBA fact sheets) contracted made the selection. The experts were asked to select only the measures they considered the most important, i.e. the ones expected to have the highest impact in the SBA area in question. The complete range of measures the experts compiled in producing this year s fact sheets will be published alongside the fact sheets in the form of a policy database on the DG GROW website. 18 POAT stands for 'Programma Operativo di Assistenza tecnica alle Regioni dell obiettivo convergenza per il rafforzamento delle capacità di normazione under the supervision of DAGL, the Dipartimento Affari Giuridici e Legislativi della Presidenza del Consiglio dei Ministri. More information under: SBA Fact Sheet Italy 18