The "Made in Italy" is in pretty bad shape

The Italian production chain does not seem as healthy as the fashion industry would have us believe. As highlighted by an investigation by MF Fashion conducted by Andrea Guolo and Matteo Minà, the situation of Italian fashion districts appears critical, with a dramatic decline in businesses and a surge in the use of social safety nets. The most affected regions are Tuscany, Marche, and Campania – some of the most vital hubs for the entire Made in Italy system. According to the MF Fashion report, signs of a slowdown were already visible in the summer of 2023, with a collapse in orders among material suppliers in the spring of that year. Since then, the crisis has intensified, and forecasts for a reversal remain uncertain. Even during Milan Fashion Week, industry insiders whispered about famous brands silently closing entire factories to cut losses (ironically, just a few days ago, Bernard Arnault stated that craftsmanship is the only way out of the crisis), and indeed, in the first days of August, Unioncamere's quarterly statistical analysis reported over 300 companies closed in Tuscany alone in the first half of the year: leather goods, tanneries, dyeing factories, and producers of bags and accessories sold in the world’s finest boutiques. In Florence and Pisa, the hours of layoffs in the leather, hide, and footwear sectors skyrocketed from over 865,000 in the first half of 2023 to more than 3 million in the same period of 2024. According to Simone Balducci, president of CNA Federmoda in Florence, 220 leather companies closed in the second quarter of 2024. During the same period, layoff requests for the Tuscan artisanal sector increased by 170% compared to the previous year, affecting over 1,600 workers.

Where are companies closing?

The issues are not only in Tuscany, which remains the most affected by this industrial hemorrhage. In the Marche region, an estimated 1,000 small businesses closed between June 2023 and June 2024. CNA Fermo, through its director Andrea Caranfa, expressed concern that when recovery eventually comes, the third-party production system may no longer be available, directly impacting small local businesses. The footwear sector in Fermo saw the highest peak in closures: 1,430 companies disappeared between 2019 and 2024, with one thousand of these in the last year alone. Here too, layoff hours increased by 212.1% in just one year. In Veneto, a lack of orders has forced many small businesses to close – a crisis that, according to Giuliano Secco, president of Confartigianato Treviso fashion division, is worsened by the spread of clandestine workshops (as uncovered in investigations being pursued by the Milan court) and a shortage of skilled workers. In Emilia Romagna, in the Carpi area, at least 100 companies have closed since 2019, and the crisis has intensified, especially in the last year. Meanwhile, in Campania, around 250-300 companies in the leather goods and footwear sectors in the Naples and Caserta areas, involving about 8,000 workers, have requested social safety nets. One constant emerging from discussions over the months regarding the crisis is the immediate recourse to welfare measures, which is legitimate when requested by workers, but less so when proposed by managers. To resolve these clearly structural problems, there is a need to restructure a system criticized for its rigidity and backwardness, focusing on long-term reforms rather than short-term layoffs.

How to emerge from the crisis

The problems have accumulated. In September, Sergio Tamborini, CEO of Ratti Spa and president of Sistema Moda Italia, explained to Il Sole 24Ore the dynamics of the crisis: “We came out of the post-Covid period, which represented a release thanks to a surge in consumption, almost creating a bubble with continuous double-digit growth. Unspent money from previous years was returning to the markets simultaneously. Certainly, a phenomenon with a significant psychological aspect not to be underestimated.” But after the initial boom came the blow from rising interest rates and mortgage increases: the precious middle class around the world stopped spending as they had, even in markets like China and Korea, where “the trend is towards increased consumption of local brands. Partly because relations with the West have become increasingly complex [...] I see a cultural and political shift towards abandoning Western models, which is reflected in the purchase of products that are inherently cultural in nature.” Added to this was the boom in secondhand goods: “The increase in reuse, of secondhand clothing, clearly impacts consumption.”

For almost all those interviewed by MF Fashion, however, training and technological innovation are the long-term way out. Simone Balducci: “We need to move beyond the concept of single-client suppliers, perhaps focusing on emerging brands, given artisans' ability to work on small orders.” Nonetheless, there is some relative confidence in a recovery, which some expect to come in early 2025, provided that the ecosystem of small and medium-sized enterprises is not too damaged by the current period. At the beginning of October, Il Sole 24Ore headlined: “Exports resist despite war scenarios.” According to everyone, innovation is needed, as well as integration between the traditional manufacturing model and the speed of new digital technologies. During the Fifth Made in Italy Summit organized by the newspaper, Roberto Giovannini, partner at KPMG, summarized the issue most saliently by stating that we must “stop talking about resilience and resistance and instead talk about vision and ambition.”