Three years of decline in the business system

The forecasting report that Confindustria will present on Thursday, 2 October is entitled 'Investments to move Italy' and will be of certain interest due to the subject matter, the delicacy of the moment, and the association's mission. In this month of October, the government will launch the Public Finance Planning Document and prepare the 2026 budget outline, in this comforted by the rating upgrade that S&P Global has announced and that Fitch has decided with a stable outlook. Also comforted by the assessment of the country's general economy expressed in 2025 with a not bad 31st place in the Imd ranking of seventy countries, better than the 41st three years ago (the government was born in October 2022), comforted finally by the international investments attracted, for which in these three years Italy has risen to 18th place from 24th.

The problem is that instead, in the same three years since the birth of the government, all the parameters of the business system (productivity, labour market, management, labour capacity) have deteriorated somewhat, falling together to 45th place from 34th in 2022. ISTAT ascertained a 1.9% drop in total factor productivity in 2023 compared to 2022 and a 2.5% drop in labour productivity. Italian manufacturing business confidence, measured by Istat at 87.3 in September, has been stable for the past few months, but is down sharply from 92.1 in October 2022. Our elaborations on the 2015-2024 balance sheets of 1710 medium and large-sized industrial companies (45% of the Istat universe), aggregated and just published by Area Studi Mediobanca, show that the technical investments made in Italy over the last three years have served to keep existing factories standing, not to upgrade or renew them. As proof, what a company puts in (added value) as a percentage of the product it sells has remained absolutely unchanged at 20% for the past three years. In the previous twenty years, investments had been even more insufficient, so much so that the average age of factories had doubled from 10 years in 2002 to almost 20 years in 2022, and has remained so until now. In 2024, technical investments were far below even self-financing, i.e. the resources generated by internal management. The uninvested surplus went to reduce financial debt, so much so that short and medium-long term debts as a percentage of shareholder capital decreased. Blaming the banks seems misplaced.

The encouraging news is that the shareholders of Italian industrial companies in the last three years have not over-distributed their profits as they had done in the past. In 2024 they withdrew dividends amounting to 39% of profits, compared to 121% in 2020, thus leaving more than 60% available for new investments to be put in place. Further elaborations on Mediobanca data show that Italian industrial companies boast not only enviable financial health, but also textbook operational efficiency. In fact, on average they grant customers little more than two months' grace, obtain from suppliers just under three months, and have inventories of three months.

Everything shows a gap between the sustainability of finance, both public and private, and today's stagnation of the real economy after twenty years of decline. This is not the place to blame this or that government, this or that minister.

Investment is a central theme. In October, the largest companies will set their three-year plans and frame the 2026 budget. This could be the moment of a turning point, the beginning of a virtuous recovery in industrial investment.