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Innovative SMEs -15% in revenues but early recovery in 2021

Alessandro Dragonetti
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Covid-19 is not stopping Italian SMEs. Surely, the pandemic crisis will also impact their revenues, but, apparently, it has not contained their vitality. In fact, there were 567 newly-registered SMEs in the dedicated section of the register held at the Italian Ministry of Economic Development in the period from October 2019 to September 2020, compared to 432 in the same period of previous year. This is certainly a good sign, even though the total number of SMEs (slightly lower than 1.700) is still limited compared to the potential catchment, which could be around some tens of thousands in Italy.

This is what emerged from the Observatory for Innovative SMEs 2020 carried out by the University of Pisa, in collaboration with Grant Thornton, which will be presented during the prize-giving ceremony of “Open Innovative PMI” Award, awarding those entities that have stood out this year in the following categories: digital research and innovation, Covid-19 resilience, and sustainability.

«The pandemic has speeded up a process that already appeared as irreversible – explained Alessandro Dragonetti, Head of Tax of Grant Thornton – i.e. the higher resilience of innovative enterprises in crisis situations, which have most chances to grow and be profitable in a scenario that is going to become even more competitive».

These businesses (which meet specific requirements, such as a turnover lower than 50 million Euro, incidence of R&D investment on turnover higher than 3%, at least 1/5 of employees having a high educational level) had already shown their dynamism compared to traditional SMEs before Covid, with an average growth in revenues by 15% between 2018 and 2019 and positive variations in Ebitda. Covid will maybe increase this gap. Newly-registered SMEs are mainly operating in the IT, electronic, chemical, and pharmaceutical industries.

«These are all industries that should be less impacted by the current crisis», stated Giulio Greco, professor in economics at the University of Pisa and coordinator of the Observatory. «We assumed two possible scenarios with regard to the impact of Covid on these SMEs. – continued Giulio Greco – In the “hard” scenario, which is currently the most likely one, we expect an average fall in turnover by 14.9% this year compared to 2019, followed by a 15.35% increase in 2021, thus with a quite moderate aggregate decrease, lower than 2%, in the period 2021-2019».

This recovery will certainly be led by the technological and innovative character of these businesses, but also by their capacity to attract foreign capital: «These are more desirable entities, both for acquisitions and for the entrance of international investors», said Alessandro Dragonetti. However, much work is still needed on this, Added Giulio Greco: «Their internationalization level is still limited – he explained – not because of businesses themselves, but rather because of the Italian economic context, which is not much attractive for large global venture capital».