SMEs, productivity gap and low scalability weigh on Italy

On the one hand, they have a weight on national GDP and employment that is about 10 per cent higher than that of SMEs in other advanced economies; on the other hand, they have a low propensity to scale and suffer from a productivity gap with large companies that is 5 per cent higher than the average of the advanced economies analysed, very close to that of some emerging countries. Italian micro, small and medium-sized enterprises represent a high-potential resource. Which, however, remains partly unexpressed.

Photographing this situation is the report 'A microscope on small businesses' produced in May 2024 by a pool of experts from the McKinsey Global Institute. The report examines micro, small and medium-sized enterprises (SMEs) operating in various sectors - from manufacturing to construction, from commerce to ICT - in 16 countries around the world: ten of these belong to economies that are defined as advanced and which, in addition to Italy, include the United States, the United Kingdom, Germany, Japan, Spain, Australia, Poland, Portugal and Israel; six, on the other hand, are included among the emerging economies (Brazil, Mexico, Indonesia, India, Nigeria and Kenya). Overall, SMEs generate about 50% of GDP in the countries analysed and contribute 40% to employment. In Italy, the situation is different: small and medium-sized enterprises contribute 63% to added value and 76% to employment. These values are higher than the average values of the advanced economies examined, 54% (contribution to GDP) and 66% (employment) respectively.

The scenario changes if we look at productivity, where the contribution of small businesses is smaller: in Italy, the productivity of SMEs is, on average, 55 per cent of that of large companies against an average of 60 per cent recorded in advanced economies, led by the United Kingdom with 84 per cent. "Small enterprises tend to be less productive than large ones," explains Marco Piccitto, McKinsey's managing partner for the Mediterranean, "and in Italy this is most evident in the weight they have on GDP, which is almost 10% more than the average of the advanced economies analysed. Small Italian companies have a smaller than average size and are therefore less likely to become large companies'.

The difficulty of the smallest entrepreneurial realities in making a leap in size emerges clearly if one analyses the number of companies that, having been SMEs at a point in history after 2000, were listed companies with high capitalisation in 2022: only 5 out of 100, compared to 44 in Australia and 42 in Israel. The Italian percentage - equal to that of Spain - is almost four times lower than the average. "There are three factors that affect the productivity and scalability of SMEs: technology, talent and capital," explains Piccitto. According to the expert, one of the reasons hindering the growth of small domestic companies is the "lower propensity to operate in the technology sector, which along with mining is one of those where scalability has proven to be the greatest, with around 30 per cent of companies moving from SMEs to large listed in the last two decades, and the lower adoption of technology". The lack of a technological propellant is compounded by the "lack of skills and talents that, like technology, represent an important driver of growth" and that often, in very small and family-run companies, are not invested in. Also because of "an underdeveloped capital market for SMEs". Which, therefore, would limit access to capital, but also to incubators and accelerators to develop a range of managerial skills.

The dispersed potential is high: a McKinsey simulation shows that, if the productivity of Italian SMEs were to be brought up to the same level as that of the productivity 'champions' in the various sectors among the countries analysed by the report, an increase in GDP of +6.4 per cent would be achieved. A growth percentage that puts Italy in second place among advanced economies behind Japan, almost on a par with Poland. And makes our country stand out against the average, which is +5% for advanced economies and +10% for emerging ones.