Italian fashion industry loses €3.5 billion to Covid-19 in Q1
May 12, 2020
The Italian fashion industry has made a highly negative assessment of its outlook as lockdown is ending in the country. In a video conference held on Monday, Sistema Moda Italia (SMI), the association of Italy’s textile and apparel manufacturers, presented a study on the impact that the Covid-19 crisis has so far had on the sector as a whole. Notably, the Italian fashion and textile industry lost over €3.5 billion in revenue during Q1 2020.
Of the companies surveyed in the study, 49% suffered a downturn in orders ranging between 20% and 50% compared to the same period a year earlier. For 29% of the companies surveyed, the order shortfall was between 10% and 20%. The figures were disclosed by Marino Vago, president of SMI, who also said he expects an even sharper downturn for the rest of the year.
Exports, the driving engine of Italy's textile and apparel industry, could fall by 20% in 2020 according to SMI's estimates, equivalent to a revenue loss of €6 billion. Taking into account the repercussions of this exports shortfall on the entire supply chain, the industry as a whole is expected to suffer a revenue loss estimated at between €7 billion and €9 billion.
The survey’s interviews were carried out between April 7 and 17. Of the respondents, 76% said they were still not operational at the time, while 24% of them were busy with administrative work and online trading only. Notably, 13% of respondents said they had been able to switch their production lines to making personal protective equipment, like masks for example. “Investments have been made with a view to reconvert output, a switch that could turn into good business for many companies given the high level of demand for masks in the months to come,” said the General Manager of SMI, Gianfranco Di Natale.
Nearly 95% of the companies interviewed resorted to employment protection measures, especially furloughs, and for 65% of respondents these measures involved more than 80% of the workforce. Indeed, the main plea SMI is making to the Italian government is for help with employment protection measures which, according to the association’s senior management, are proof of a “genuine willingness to safeguard the Italian fashion industry’s labour force.”
Secondly, SMI’s associates are asking for “policies to guarantee liquidity,” in other words making loans more easily accessible, as well as for appropriate “fiscal policies.” Vago said that “if the state was to refrain from demanding corporate income tax payments on account in the months to come, this would enable the industry to immediately inject liquidity into the sector, by paying suppliers on time for example, creating a virtuous-circle effect.”
Italian fashion companies are putting “relationships with their clients” top of the list of problems generated by the Covid-19 crisis. In other words, they are concerned about the deterioration in the relationships between businesses along the entire supply chain. SMI’s top executives underlined how some leading groups have in fact been abusing their dominant position.
Financial and cash-flow problems rank only second, followed by the country’s burdensome bureaucracy and the cancellation of the main industry events and trade shows. Regrets about the latter were interpreted positively by SMI, since this preoccupation seems to be a sign of optimism on the part of Italian fashion groups, “keen to move forward despite the situation.”
Nevertheless, during the conference, Vago lambasted Italy’s fashion companies and industrial districts for their lack of cohesion, as once again their voices were discordant rather than the expression of a united front. Vago notably highlighted how value is distributed unequally across the supply chain, often to the detriment of its upstream elements, like textile manufacturers.
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