2021: Doing Business in Italy

1. What is the current business climate in your jurisdiction, including major political, economic, and/or legal activities on the horizon in your country that could have a big impact on businesses?

The outbreak of the COVID-19 pandemic has dramatically affected global economic activity since early 2020, but in a context of high uncertainty, Italy’s growth in the first part of the year was very positive, and the economy is predicted to grow by 6% in 2021. The Government introduced new measures to support workers and firms and to relaunch the economy. In mid-July, the Council of the European Union approved the National Recovery and Resilience Plan (NRRP) submitted by the Government at the end of April, securing the outstanding amount of EUR 222.1 billion. The recovery is expected to be marked by a strong investment market, thanks to the outlook for demand, favorable financing conditions, and the support envisaged under the NRRP.

The plan is developed around three strategic axes shared at a European level: digitization and innovation, ecological transition, and social inclusion; and has six missions: (1) Digitization, Innovation, Competitiveness; (2) Green Revolution and Ecological Transition; (3) Infrastructure for Sustainable Mobility; (4) Education and Research; (5) Inclusion and Cohesion; (6) Health.

We expect that investment in all these sectors will strengthen competitiveness, reduce bureaucratic burdens and remove constraints that have slowed down investments or reduced their yield in the past.

The ongoing justice reform plan is also worth mentioning, which will provide a major change in the legal framework with specific measures intended to tackle one of the significant obstacles to investment in Italy - the complexity and slowness of the Justice system. Its approval will increase transparency and the predictability of the duration of both civil and criminal proceedings.

2. From what countries do you see the most inbound investment? What about outbound?

There has been an increase of 5% in foreign direct investment projects in 2020. The United States (24%), France (16%), and Germany (12%) are among the largest investors in Italy, although the origin of the flows remains geographically diversified. The North-West is confirmed as the most attractive area, followed by central Italy (24%).

Regarding outbound investment, despite the remaining uncertainties concerning the global economy, Italy remains one of the leading European investors in countries outside the EU.

3. In what industries/sectors are you seeing the most opportunity for foreign investment?

Italy is currently the world’s eighth-largest economy, a member of the G7 group, and a global leader in a range of industrial sectors, including the textile, machinery, automotive, chemical, and pharmaceutical sectors.

The Italian economy is characterized by a predominance of small- and medium-sized companies, family-owned enterprises, and geographically specialized industries.

Strategically positioned within Europe and the Mediterranean region, Italy offers a wide range of opportunities for foreign investors, especially those interested in acquiring Italian technologies, brands, and distribution channels to secure a gateway to Europe.

Service companies (13%), software and IT (12%), logistics, and wholesale (12%) attract the most investors, followed by finance (8%) and pharmaceuticals (7%).

The industries involved in the NRRP mentioned above are likely to be very dynamic.

4. What advantages and pitfalls should others know about doing business in your country?

The vast package of investments and reform projects envisaged by the NRPP has increased the desire to revive Italy’s economic growth and overcome the difficulties faced during the pandemic. Italy is aware that it is crucial to take advantage of this unique opportunity. The NRRP defines a broad and ambitious package of investments and reforms that complement the traditional strengths of the Italian business environment.

Among the critical points, there is still regulatory uncertainty, and excessive bureaucracy faced.

5. What is one cultural fact or custom about your country that others should know when doing business there?

Despite Italians being generally very friendly and kind, Italy’s business culture can be quite formal. Therefore, dress and presentation, as well as appearances, play an essential role.

The backbone of the Italian economy is made of small- and medium-sized companies, and most of them are family-owned. The founder usually has a substantial impact on running the business and may be reluctant to accept changes or external interference. A proper “psychological” approach can therefore be supremely important.

Italy can be grouped into three “macro-regions,” usually indicated by: the South, the Centre, and the North. This distinction reflects a series of geographic and socio-economic regional differences. English is, however, widely spoken, especially at a business level.

Italians are generally flexible, multi-tasking, and not easily offended, and you can both criticize and joke with them freely; indeed, a sense of humor will be appreciated. However, even when your host is explicitly negative about some aspects of the Italian situation or characters, avoid expressing additional criticism of your own. Besides business, movies, sports, arts, travel, fashion, etc., can all be good topics for a friendly and animated discussion!