Covid, EY: ‘Italy is 5% more attractive for investments’

The attractiveness of the ‘Italian system’ is strengthened despite the pandemic. In 2020 the number of foreign direct investment initiatives (‘FDI’) grew by 5 percentage points compared to the previous year and 48% of international managers declared themselves ready to expand their activities in our country. Net of the growing confidence, however, marked territorial disparities remain especially between the South and the rest of the Peninsula. This is the scenario outlined by the EY Europe Attractiveness Survey (https://www.ey.com/it_it/attractiveness/21/ey-attractiveness-survey-italia), a study that analyzes the trend of foreign investments in Europe and the perceptions of international players with the aim of investigating the level of attractiveness of each country. In 2020 Italy was among the nations hardest hit by the Covid-19 emergency, yet it turns out to be one of the few European countries to have registered an increase in the number of FDI compared to 2019. Faced with an overall decline of 13 % at a European level, our country is showing a countertrend and marks an increase of 5 percentage points for a total of 113 new projects in the program. However, the market share is still limited: Italy represents only 2% of total direct investments in Europe, placing itself in twelfth place in the ranking with other countries. Spain (-27%) and the Netherlands (-24%) and Russia (-26%) in particular recorded a sharp setback in investments in domestic companies from abroad, but the results were not encouraging. not even in France (-18%), UK (-12%), Germany (-4%). The countries of Central and Eastern Europe also suffer, with Hungary recording a dizzying decline of 54%. On the other hand, Switzerland (+ 25%), Finland (+ 23%) and Turkey (+ 18%) make a great leap forward. “Italy is attractive – explains Massimo Antonelli, CEO of EY in Italy and managing partner of the Mediterranean area, commenting on the results of the EY Attractiveness Survey -. It managed to do so in the difficult year of 2020, with a performance of + 5% of foreign direct investment projects announced and in the implementation phase, in some cases trending better than other large European economies, including the UK and France. . Year on year, the increase in projects in Italy marked a detachment in partial contrast to the European average “. If it is true that this is a positive sign of recovery,” the portion of foreign direct investments destined for our country is still limited – Antonelli remarks -. There is a need for Italy’s best resources to be channeled to make the country more attractive and competitive on an international level. We need to recreate a general climate of trust, especially now that the challenges of the relaunch promoted through the Next Generation Ee are near, and will have a strong impact on the competitiveness of the whole of Europe. A collective exercise by institutions and companies is needed so that this positive signal is a stimulus to growth and can become structural. “To attract the largest share of foreign investments in Italy in 2020 are the business services sector, so-called ‘B2B’ (13%), and that of software design and It services (12%). Even if the latter undergoes a drop of 5 points compared to 2019. The logistics and wholesale sectors (12%), finance (8%) and pharmaceuticals (7%) are growing in the year of the pandemic. While for the industrial machinery and equipment sector (5%) and for the textile sector (4%) the most marked decreases were recorded in 2020, driven by the climate of uncertainty during the months of lockdown. Foreign investments destined for our country are partly marked by the strengthening of the commercial and marketing force (22% of investment projects in Italy). This type of project is aimed primarily at intercepting internal demand, with services and products dedicated to local consumption needs. At the same time, however, investments are growing in functions with greater added value, aimed at enhancing the national technical and entrepreneurial know-how, especially in the field of production processes (19% of projects) and research and development (15%). ” Foreign investors look to Italy with renewed confidence and optimism – observes Marco Daviddi, Mediterranean leader for the strategy and transactions area of ​​EY -. In fact, 60% of the managers interviewed are convinced that in the next three years the country will have improved its competitiveness at European level, and almost half say they are ready to expand their activities in our territory. A significant portion of new investment flows focus on Italy for its technical know-how and the quality of human capital. We need to work on these aspects to enhance the excellence of our country even in areas with greater added value, including research and development, manufacturing processes and related quality controls “. Daviddi again notes,” existing infrastructures are not seen as a limit to investments , despite the heterogeneity of various areas of the country, which require investments to gain competitiveness. Strengthening domestic demand is a further lever that can be activated to enable more investments to be attracted in the future, with a consequent impact on employment and growth. In Italy, an inversion of the climate of consumer and business confidence was also detected by Istat, with an increase observed from last February onwards. “Without too many surprises, the greatest resources towards our country come from nations with greater proximity and with which Italy has always had solid commercial relations with. At the top of the ranking of foreign direct investments in Italy in 2020 are the United States (24%), followed by France (16%), Germany (12%) and the UK (9%). On the other hand, the Chinese power is positioned further behind (4%), which is just a few steps ahead of Japan (3%). It should be noted that the FDI do not follow a homogeneous distribution on the national territory, being concentrated on the regions characterized by the presence of the most innovative industrial districts (by way of example, mechatronics, luxury and design, furniture, textiles, biomedical), especially in the North-West ( 58% of FDI) and central Italy (24%). On the other hand, the focus was on territories characterized by infrastructures, physical and digital, more interconnected and on densely populated areas, in which logistic platforms have developed, at the service of omnichannel. economy, critical issues remain to be addressed in order to increase the attractiveness of the country. First of all, a partial uncertainty at the regulatory level, which is indicated as the most urgent issue by 58% of the interviewees. Among the critical issues highlighted, an excessive bureaucratic burden for the business (55%) is also mentioned. Cutting taxes (29%), supporting small and medium-sized enterprises (28%) and reducing labor costs (28%) are the three macro-areas of intervention that, according to the managers interviewed, would allow to give a boost decisive for Italian competitiveness. It is interesting to note that, by restricting the field of analysis to investors who have already established activities in Italy, the strengthening of environmental sustainability and green transition policies (35%) are added to the priorities to be addressed, with respect to labor costs and the reduction taxation, which are not among the primary objectives of the country’s political-economic agenda. Italy is part of the expansion plans of almost half of the managers interviewed. 48% of the EY survey respondents say they are ready to establish or expand their activities in the country within the next year. Therefore, a climate of optimism and trust on the future of the Italian economic system prevails for 60%: there is in fact the widespread belief that in the next three years its attractiveness will strengthen (42%) or even improve considerably (18%) . Of the sample interviewed, all the companies operating in the technology and digital sector would be interested in investing in Italy. The telecommunications (75%), energy (71%) and financial services (70%) players follow. On the other hand, those who operate in advanced manufacturing (33%) and in the media and entertainment industry (17%) are more cautious.