“Industry, the driving force of Italy, propels the European recovery” asserted the Centro Studi Confindustria research centre in its recent report on industrial scenarios (Il Sole24Ore, 21 November). In fact, our manufacturing industry has returned to pre-pandemic activity levels (its added value in current dollars has gone back to 2.2% of the world’s total) and it’s improving in Germany (with production figures 10% lower than what they were before COVID) and France (down by 5%).
Basically, the Italian industry is consolidating its export capacity, breaking new ground in the internal market (also thanks to the Draghi government’s subsidies for the building and consumption sectors), investing in digital innovation and in environmental and social sustainability (with cohesive businesses that are mindful of community, inclusion and solidarity values, and that are more competitive, as the latest Symbola studies on the Green Italy show). And if it were not affected by a major, widespread lack of specialised workforce and the dizzy increase in the price of energy and components – starting with microchips – it could grow even further.
There is no doubt, continues the Centro Studi Confindustria, that the growth of the Italian GDP – a growth of over 6% in 2021 – is largely due to the production efforts undertaken by the Italian manufacturing industry. And while another increase of 4.4% is expected in 2022, much of the data confirms that this financial recovery is not just a rebound following the 2020 crash, as it displays strong indications of structured growth in many sectors (mechanical engineering, electrical equipment, electronics, rubber, plastics, lumber, etc.).
A positive period, then. Not to be wasted, but to be exploited in order to rebuild wealth and a stable job market. But also a period in which to pile up resources that will allow us to pay off the interests on the public debt, incurred to tackle the pandemic crisis and the recession and to allow for continued investments. A proficuous use of the EU funds, following the indications of the PNRR, the Italian recovery and resilience plan (focused on the digital and environmental transition, research and education, reforms in public administration and laws, large strategic infrastructures) is essential in order to strengthen this path of growth – it’s a significant political and economic challenge that involves institutions, political and social forces, enterprises.
The Centro Studi Confindustria also maintains that the number of companies that have radically altered their value production chains, supply chains, supply networks, is increasing. Our manufacturing industry is coming home: a clear change in direction when we think of choices that were popular only a few years ago (when production was relocated to countries that offered lower costs and better conditions, from the Far East to certain areas of Eastern Europe).
Hence, backshoring – or reshoring, if preferred – continues; factories are no longer located abroad and supply chains are getting shorter, replacing those long, protracted ones demanded by international strategies when globalisation was booming, when China and India were the “factories of the world”. Indeed, local social and economic factors are fracturing them – suspensions from a lack of raw materials, jams in the transport system, strains due to tensions of any kind, interruptions caused by cybercrime. Better, then, to try and produce in a safe environment, and therefore bring production and supply chains back home, to more auspicious places where they can be adequately managed and kept in check.
Backshoring tactics that, of course, should not be adopted by each single European country separately, but aimed at turning the whole of Europe into a domestic market, a common production hub to be developed, to become more competitive at an international level.
Sure, global trends won’t disappear, and we’ll keep some manufacturing in the Far East – but in general we’ll increasingly adopt a local-for-local approach, a production system suited to internal markets, and abandon old-fashioned strategies relying on large import and export volumes. This is not at all meant to sound protectionist – it’s merely a shift in competitive attitude, to give companies the chance to strengthen their production skills and their quality in the world’s markets, and in more autonomous and safe conditions.
Maurizio Marchesini, vice president of the Confindustria section dedicated to supply chains and SMEs, believes that “We find ourselves in a very complex transition stage. Digitalisation, sustainability, new assets in the global value chains, are posing significant challenges that not only affect the production systems, but society in general.” And also that “institutions and industry must collaborate, in order to define a road map” for the transition.
This paradigm shift, this deep renewal of corporate culture, are significant. A return of manufacturing in Europe and in its more industrial countries (Germany and Italy, but also France and Spain) needs to be stimulated and consolidated by an appropriate, fully fledged European industrial policy (thankfully, we can glimpse some traces of it in parts of the Next Generation EU Recovery Plan). And those quality and sustainability traits that more strongly define European industry – as opposed to American, Chinese and Indian industries – need to be enhanced and turned into key competitive assets. The automotive industry, for instance, which is undergoing a difficult and socially expensive transition towards electric cars, should in fact be one of the main sectors on which both the European Commission and the best automotive nations (such as Germany, Italy and France) should really focus investments and innovation.