A look at Gucci ArtLab in Florence.

MILAN With the overall business of the national manufacturing industry expected to decrease in the second quarter, the results of the upcoming European elections appear crucial for the future of Italian production.

“We really hope that following the European elections we can all start a process aimed at making Europe a real single market to face the challenge of the international markets dominated by huge players, like the United States and China,” said Alessandro Spada, vice president of Assolombarda, the association representing the companies operating in the Lombardy region.

During the presentation on Tuesday of the “Where the Italian manufacturing industry is going” report, released by the association Confindustria, the importance for the Italian sector to consider Europe its domestic market emerged as vital.

In particular, the report illustrated by Andrea Montanino, director of the Centro Studi of Confindustria, highlighted that international exports are having a smaller and smaller impact on the growth of single markets, globally.

“I think that this reflects two major things: first of all that there are evident political difficulties in the management of multilateral trade agreements; second thing that countries are oriented toward the development of strategies more focused on domestic or regional markets,” said Giorgio Barba Navaretti, economics professor at the Università degli Studi of Milan. “In this perspective, for several reasons, including the size of the country, Italian manufacturing companies have to focus on the demand of the European market.”

While Italian manufacturing companies are producing less, they are manufacturing products with higher quality standards and consequently higher prices, according to Confindustria’s report.

“This aspect has definitely enabled Italy to stop competing with countries with a lower labor cost, a dynamic which defined the Nineties,” explained Barba Navaretti. “However, it’s not protecting the country from the competition of those industrial countries which have focused on the development of high-tech technologies.”

According to the report, despite the stagnation of production volumes, Italy is demonstrating a certain dynamism in some new areas, such as the pharmaceutical industry, registering significant growth rates in terms of exports. “Generally, people tend to think that Italy exports only those products related to the Made in Italy, such as fashion, footwear and food,” said Montanino. “However, even if that sector remains important, accounting for 14.6 percent of the country’s total exports, the mechanical engineering compartment is the one which exports more, accounting for 40 percent.”

But, how can Italian manufacturing companies remain competitive on a global scale? Through digitalization, highlighted the report, which pointed out that two-thirds of the companies which used 2017’s tax incentive called hyper-depreciation were small and medium-size ones. In particular, the hyper-depreciation enabled companies to depreciate at 250 percent. However, this depreciation rate was applicable only to assets suitable for sparking the technological transformation of enterprises under an initiative known in Italy as the “Industry 4.0” plan.

“When the growth mainly depends on high technology and digitalization, the risk is that the gap between big and small players gets bigger and bigger,” said Barba Navaretti. “For this reason, it’s fundamental that governments introduce measures to prevent that smaller companies see their global competitiveness reduced.”

In this perspective, Fabrizia Lapecorella, general director of finance at the Italian Ministry of Economics, praised the government’s newly introduced “Growth Decree,” which will include incentives for those companies that will decide to merge to create bigger and more competitive entities.

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