SME Report 2023: stability and future perspectives of the Italian market

The modefinance SME 2023 Report is out! The analysis provides an overview of the stability and prospects of the Italian market, examining the financial strength and sustainability of SMEs, with a focus on predictive models.

The report is based on the use of Rating methodologies to assess the health of Italian small and medium-sized enterprises. For the first time, through a holistic approach, the analysis evaluates not only economic and financial aspects but also corporate sustainability. The survey draws on analysis from the latest available financial statements, referring to the year ending 12/31/2022, followed by an in-depth examination using a combination of proprietary nowcasting and forecasting methodologies, regarding the evolution of the health status in 2024 of selected sectors. Finally, an analysis is proposed on the ability of Italian SMEs to address challenges and seize opportunities related to sustainability.

The sample considered includes approximately 97,000 SMEs, with turnover up to 50 million euros and a number of employees ranging from 10 to 250, representing the Italian industrial fabric dominated by small and medium-sized enterprises.

The main economic and financial results emerged from the analysis using the MORE methodology indicate a general stability of Italian companies compared to the previous year. This stability is highlighted by the fact that 32% of companies have not undergone changes in their Score class, demonstrating resilience even in the face of the complex geopolitical issues that characterized 2022.

The distribution of companies by score class (which can be observed below) reveals that the health status of over half of the sample can be considered adequate, with a prevalence of companies in the middle classes. The evolution over time of this distribution is interesting: in 2022, the best scoring classes recorded a percentage increase, while companies with situations of strong vulnerability decreased. This trend reflects a progressive improvement in economic-financial balance initiated in 2019, interrupted only by the pandemic.

However, there is a contraction in aggregate turnover, primarily due to the reduction in business volume and the increase in raw material costs, which impact business margins.

2023 was marked by significant events such as inflation growth, extreme weather events, and credit restrictions, affecting various sectors. The effects of these events on businesses will only be visible from the second half of 2024 with the publication of the previous year’s financial statements. However, through our predictive Nowcasting and balance sheet simulation models, it is possible to anticipate the performance of companies by sector. Within the analysis, the following sectors were chosen for illustrative purposes and because they were directly affected by the 2023 events: food, large-scale retail, and construction.

Across all analyzed sectors, substantial stability is forecasted for 2023, with the majority of companies expected to maintain their creditworthiness. However, in the construction sector, signs of slowdown are observed, leading to around 18% of companies experiencing a creditworthiness downgrade in 2024.

The increase in extreme weather events in 2023 highlights the need to consider the health of businesses not only from an economic-financial perspective but also in terms of sustainability.

This awareness has led in recent years to the emergence of a new evaluative paradigm aimed at analyzing companies in terms of their environmental (E), social (S), and governance (G) impact. ESG evaluations are assuming an increasingly significant role in credit access, with prospects of becoming an integral part of creditworthiness evaluations.

The latter part of the study thus offers an in-depth analysis of the sustainability of Italian companies conducted through modefinance’s ESG Automated Score methodology on a segment of the SME analysis sample consisting of 1938 companies.

The survey results demonstrate a strong performance of the analyzed companies, with a distribution mainly in the higher and intermediate classes. Sectors such as agriculture, energy, and commerce appear to be more exposed to environmental damage, while service, technology, and financial sectors exhibit a solid governance structure and less economic impact from extreme weather events.

In conclusion, Italian SMEs demonstrate their ability to confront the numerous challenges posed by the contemporary world. Despite a complex 2022, most Italian businesses have managed to maintain their health intact, and the projected creditworthiness of the analyzed sectors suggests a stable trend for the future. Regarding sustainability, companies exhibit a growing awareness of environmental and social issues, showing they have all the necessary tools to turn this significant challenge into opportunities for growth and improvement.