SMEs in Southern Italy: financially sound but lacking in governance

A robust business sector with strong roots in its local areas, capable of generating impressive profit margins, yet at the same time constrained by traditional governance structures and still somewhat hesitant when it comes to measuring sustainability and opening up to foreign markets. This is the picture painted by the first report from the Methrica Observatory for SMEs in Southern Italy, the result of a collaboration between Methrica – a spin-off from the University of Naples Federico II – and Banca Generali Private.

The survey analysed a large sample of 10,893 manufacturing SMEs operating in the South and on the Islands (excluding purely commercial businesses), providing a detailed picture of the region’s industrial fabric. This is a sector where small-scale businesses remain dominant: 82 per cent of firms have between 10 and 49 employees, compared with 18 per cent of medium-sized firms, and where longevity is a defining feature: over 75 per cent of the sample have been operating in the market for more than a decade.

From an economic and financial perspective, the typical business in Southern Italy shows reassuring structural health. The median liquidity ratio stands at 1.22, the median EBITDA margin reaches a significant 10.5 per cent, whilst ROA stands at 3.5 per cent and ROE at 13.3 per cent. Geographically, more than two-thirds of the total is concentrated in just three regions: Campania leads with 3,431 companies (31.5 per cent of the total), followed by Puglia with 2,181 businesses (20 per cent) and Sicily with 1,751 (16.1 per cent). Abruzzo accounts for 9.8 per cent with 1,069 firms, whilst the picture is rounded off by Sardinia (655), Calabria (637), Basilicata (348) and Molise (181). From a sectoral perspective, revenue is driven primarily by construction and plant engineering (36.7 per cent), agri-food (10.6 per cent), metalworking (10.1 per cent), agriculture (8.4 per cent) and materials (6.5 per cent).

Whilst the financial results hold up, it is on the organisational front that the most obvious limitations emerge. In 71 per cent of SMEs, governance is entrusted to a sole director – a figure that rises to 80 per cent amongst small businesses – whilst a board of directors becomes the norm only amongst medium-sized firms. Senior management has an average age of 55, with an average tenure of over nine years, and women account for just 17 per cent of the senior leadership. In 72.3 per cent of cases, at least one member of senior management has a direct stake in the company. This structure is reflected in compliance and sustainability frameworks. Although many companies adopt green operational practices, the adoption of structured metrics and reporting models remains confined to a few leading examples. Of the 1,100 companies analysed in detail, 245 have documented policies (193 codes of ethics, 177 whistleblowing channels, 148 ‘Modello 231’ compliance frameworks), yet formal environmental certifications (ISO 14001) are held by only 71 companies, and corporate ESG reporting is carried out by just 10 organisations.

“Many SMEs in Southern Italy have already embarked on concrete paths towards sustainability, innovation and development,” explains Marco Bernardi, Deputy General Manager of Banca Generali. - “The challenge today is to turn these into structural drivers of competitiveness. At Banca Generali, we support entrepreneurs and entrepreneurial families with a long-term vision, working alongside them on issues of growth, governance, generational succession and access to capital. Our collaboration with Methrica, Federico II University and Intermonte, as well as the Pmi2Change project – created to facilitate a more efficient connection between the capital markets and Italian businesses – are all part of this effort.”