Made in Italy, a 100-billion dollar Restart

How can the economy be re-launched in a post-COVID world?

(Original article by Manuela Andaloro published in Italian on Corriere dell’ Italianita’.)

There’s no way around it, this is a time of great hardship, complex mechanisms, and unknown variables. 2020 will probably go down to history as the Annus Horribilis of the past 70 years, given the terrible cost in terms of human lives and public health, and due to the incredibly strong impact on the entire economic system, both national and global.

Still, despite the severity of this shock, Italy’s economy grew by 16.1% in the third quarter from the previous three months, a much stronger rebound than expected following a coronavirus lockdown, outperforming the UK, Spain, Germany and France. The rise in Italian industrial output also points to strong economic rebound.

Lombardy is the 1st regional economy in Italy, its GDP is nearly equivalent to Switzerland’s.

The preconditions – as we have seen in the recent Rapporto Export (export report) issued in September 2020 – for a restart of the Italian nation seem to exist. A strong relaunch is possible by means of Italy’s driving force: Made in Italy. Fashion, Furniture, Design, Food, Manufacturing, Engineering, Tourism: these are all sectors in which “italianness” is an established synonym of quality, reliability, and creativity.

It includes businesses deeply-rooted in certain areas, with a fabric of supply chains and districts in all Italian regions, with a significant push towards international markets. The strength of the “Made in Italy” calling boosts export, increases the competitiveness of the entire Country System, and leverages on both the growing digitization and a now unavoidable global trend: sustainability. A strong attention towards “green” sectors, viewed as an opportunity for the environment and the planet to have their revenge, but also an occasion for investment, growth, and employment for the entire production network. In this scenario, the Country’s priorities intertwine with those of the Green New Deal for Europe, and are targeted towards reaching the goals set by 2050.

In this context, it was very interesting for me to take part – from October 6 to 8 – in one of the few digital happenings that has set a clear and precise end: to understand how to restart the Italian system, and how to do things better than before. “Made in Italy: The Restart” was a three-day program of digital events organized by two leading financial publications such as Il Sole 24 Ore and Financial Times, for the relaunch and recovery of the world of Made in Italy excellence: a series of structured events, and an occasion for debate on the related growth strategies. A stellar lineup of Government representatives, CEOs, and over 40 top managers and entrepreneurs representing Italian excellence were brought together through streaming and simultaneous translation.

Participants included five Italian Ministers, two Undersecretaries, five representatives of Confindustria (Italian industry business organization) – with President Bonomi leading the group, the Governor of Banca d’Italia (central bank of Italy) Ignazio Visco, and over 40 top managers and entrepreneurs embodying Italian excellence. It was a moment of reflection, but also an organized relaunch and amplification of a clear message: Made in Italy is strong, and recognized worldwide as a symbol of quality, safety, and reliability.

Dominated (40%) by the luxury good sector, where Italy stands in 3rd place at the global level, the industry is completed by food, fashion, furniture, and personal care products. Made in Italy goods have also increased in value in the automotive, oil & gas, pharmaceutical, and engineering fields, which goes to show the versatility and eclectic nature of Italian companies.

il Sole 24 Ore, The Banker, interview to Ignazio Visco, Bank of Italy

Innovation is the keyword pushing great Italian businesses, not only in terms of product design, but also in business choices that have consolidated the presence of Italian products on the most competitive international markets (US, Japan, Germany).

In spite of the current COVID crisis, the Made in Italy market strongly affects the development of Italian and international economies, and now enjoys and crucial role on the global stage and in terms of proliferation of new business opportunities in the import and export of all that which is manufactured in Italy, known abroad as a cradle of pristine craftsmanship.

The value of the Made in Italy label has grown by 14% from 2018 to 2019, reaching 96.9 billion dollars (source: BrandZ Top30 Most Valuable Italian Brands 2019). Stronger than the aura of economic and political uncertainty, Italian brands have continued to grow in double digits, year after year, thanks to a solid worldwide presence. Over the past 40 years, “Made in Italy” has become more and more a brand, a label, and an intangible value that increases the competitive advantage of goods. The global demand for Italian products is continuously and constantly on the rise in traditionally responsive markets, but has also and especially grown in emerging economies that look at our country as an example of excellence.

Moreover, the great Italian brands are a driving force for small and medium enterprises that – although not enjoying the same notoriousness – benefit in terms of perceived quality and innovation.

The Italian economy has adequately avoided recession in the past few years, and one of the main reasons is its growth in export, with Made in Italy acting as the driveshaft to achieve comparable and sometimes greater results than those recorded by the German market.

But what is behind the fame of Made in Italy? The positive image of Italian companies dates back to half a millennium ago, in the Renaissance. An occasionally turbulent time, it nonetheless sanctioned the quality of Italian technology and aesthetics, along with a knack for business based upon manual skill and craftsmanship.

Ministry of Foreign Affairs Luigi di Maio

Two fundamental take-aways may thus be extrapolated from the topics dealt with by many of the speakers present at the Il Sole 24 Ore- Financial Times 3-day event. The first was summarized by Ministry of Foreign Affairs Luigi di Maio, who spoke of how innovation and digital technology are extremely strong levers for a post-COVID success: “We cannot waste the opportunity that this crisis grants us: innovation and digitization will be the levers of success in the post-pandemic phase, both in Italy and worldwide”. The second take-away is environmental sustainability, a central topic that must capitalize on the great awareness gained in terms of the need for a sustainable approach towards the future of our Planet and of coming generations.

With our excellence, strength, and togetherness as our re-starting block, we shall go far, once again.

Manuela Andaloro

(info@smartbizhub.com)

Sources: FT, Reuters

Original article published in Italian on Corriere dell’ Italianita’.

Is this the end of big cities?

Article by Manuela Andaloro for Corriere dell’italianita’.

Being an investor in the real estate market for years, I have grown quite an interest in the dynamics that drive the sales and rental markets. The golden rule has always been the same: location is key.

This was a cornerstone in the pre-COVID time. What about now? 

Will COVID cause a real estate vacuum in big cities and a boom in rural towns?

The latest developments suggest that the ‘smart working revolution’ will prompt people to flee overcrowded and expensive cities for greener and more sustainable areas. Thanks to speedy broadband connections and a reliable network infrastructure, many are considering moving to holiday homes, in the suburbs, the countryside or the mountains, at the beach or the lake. Lockdowns seem to have opened up new scenarios: living in nature, reconciling family, career and leisure time whilst keeping a well-paid job in the city is now possible.

Will the urban fabric undergo some deep changes then? And, above all, is this event large enough to be considered a structural change?

A shift towards a coveted more sustainable future, supported by the introduction of COVID-19-related rules, was inconceivable until a few months ago in a society devoted to extreme urbanisation. 

Social distancing and the ongoing pandemic have deprived big cities of their greatest charm – melting pots that attract and blend the lives and skills of different people. Those who love cities – and there are many of them – cannot wait to return to normalcy or, rather, to a new normal, because this epidemic, like every crisis, is also an opportunity to rethink and improve our lifestyle. And this is true also for large cities.

Famous architect Stefano Boeri, earlier this spring expressed his stance on the matter without any doubts: "In the UK people are expected to leave most densely populated areas soon". The same goes for Italy, where those who own a second home will most likely decide to move there or, at least, spend long periods there, making the most of the convenience and potential of smart working. Boeri considers this experience an opportunity to rethink one's way of life and stresses that "going through this tragedy without understanding its causes would be a real waste".

After all, what is the point of paying more than a thousand Euro for a room in central London, Paris, Milan, New York, if you can work from a larger house, perhaps with a garden, from any location?

Questions like this are frequently asked in public debates worldwide and many people answer without a second thought, especially in the wake of the recent lockdowns, confined to narrow spaces without any nature. It is not worth it, the future of our cities is at risk. 

The New York Times has published an extensive article on this subject. The analysis concludes that the Coronavirus could represent an unprecedented cut-off for urban concentrations.

Gabriele Albertini, the former mayor of Milan, talks about the lure of large urban hubs: “Should this situation persist for years, urban design will have no choice but to adapt. Cities have much more to offer than only a physical workplace: besides the work opportunities, we cannot forget also the social and cultural ones. It is wrong to limit a city only to its offices”.

However, the tendency to flee large cities is quite significant: as the Financial Times reported, in the City of London most companies are in no hurry to bring their employees back to their offices.

Many big companies are going down the same road – Google will not have its employees back in the office before spring 2021 while Facebook went the extra mile, announcing that half of its employees will work from home within the next 10 years.

Are the policies of some companies sufficient to generate a structural change leading to the opposite direction to what we have witnessed for hundreds of years, during which mankind has migrated to cities, or will this be merely a privilege for a few?

Will the housing market in cities hold up in the short term? What about megacities versus smaller, greener cities close to nature?

On top of that, there is a social factor to consider. Both private and working life is fuelled by physical presence, by one's network, by the readiness to seize new opportunities or participate in events... All of this is possible only in large cities.

Finally, we must take into account the inevitable commercial interests of the geopolitical stakeholders in big cities. The investors backing the construction of skyscrapers and offices in "prime locations" will clash with large companies for divergent interests.

The governance of the cities will not accept full time smart working indefinitely. The conflict will then affect access to public assets, events, public transport.

If buildings, theatres, cinemas, trains can no longer reach their full occupancy, costs will increase and the final consumer will have to bear them.

Not to mention health. How will countries deal with an increasingly elder population, dispersed in small towns?

Will we face increased health risks when living far from the major health facilities?

Politics will then come into play, taking one or the other side. Climate change will be a hot topic too: on the one hand, it is safe to say that less crowded urban areas ensure environmental sustainability and less pollution; on the other hand, however, we will have to rely less on public transport and more on private cars and we will have to build new homes and infrastructure.

There is clear evidence that megacities (cities with a population of more than 10 million people) such as New York, and London will suffer long-term impact.

The so-called “London crisis” goes beyond the fear of Covid, Londoners were happy to give up days that involved hours of travel squashed on tube and trains, unhealthy and expensive meals and stressful interactions with bosses and colleagues.

Unlike in other smaller cities, only 20% of employees has gone back to the office and to the City. The remaining 80% has little intention to return to a pre-COVID time.  Will London become a ghost town? The fear is real: the City remains empty, offices are deserted, cafes closed, few people around, public transport sees 70% less people. The result is catastrophic: the entire economic system on which the British capital was based is crushed. It is the business model of the capital that is going into meltdown: until now it was based on the idea of ​​concentrating millions of people in the centre.

The pandemic has made clear that current technology makes all this superfluous as everything can be done from home.

Someone compared the fate of London to that of the Northern England mines in the 1980s: when their model became obsolete, they were forced to close. Will the same happen to what used the most electrifying metropolis in the world?

And what about the city that never sleeps, New York City, will it ever wake up?

Not according to James Altucher, a best-selling author and former hedge-fund manager who wrote, in a recent article that went viral, that New York City is “dead forever” as its residents come to grips with the reality of the coronavirus pandemic and what it means for the fate of the Big Apple. Altucher isn’t alone, of course. The New York Times back in June asked the “agonizing” question: “Is New York City worth it anymore?” amid a mass exodus of an estimated 420,000 residents between March and May.

What about smaller cities?

What will be the normal way of city life when the pandemic passes? What will remain and what will disappear?

Like all change, it is difficult to predict. But lessons from history provide us with important knowledge: 

1.     Temporary change sometimes has little lasting effect.

2.     Lasting effects are often the acceleration of existing trends, rather than new, crisis-caused trends.

Working from home has overnight become endemic. Schools and universities switched remarkably quickly to almost exclusively online platforms. We might truly have an opportunity for our cities to shift to new ways of more sustainable urban living. This might be harder to achieve for megacities, easier perhaps for smaller, more adaptable cities. Businesses should seize the opportunity, implement the technology and leverage the current strong determination to achieve successful outcomes and more sustainable ways of living.

So will COVID cause a real estate vacuum in big cities and a boom in rural towns?

Through an exploration of trends the virus has brought to retail, office, hotel and residential real estate, as well as the air travel and vacation industries, a recent report by Fitch Ratings, makes some predictions for the future.

City center real estate may take a hit.

Newly remote workers may transform the residential real estate landscape because of a desire to move to suburban or rural cities. They need bigger homes to fit in their home offices, the report said. People also want outdoor living space because of their experiences during lockdowns.

“Within the big cities, there could be weaker demand for malls, non-grocery real estate and office space. Empty office and multi-family residential buildings may wind up meeting housing needs and bringing down housing pricing pressure in big cities, the report said.

Renting, rather than buying, apartments or homes may become more popular for several reasons. Some people may not be able to obtain affordable credit, while others will just feel uncomfortable taking on a big loan during the uncertain economic climate.

This may significantly increase demand for rental housing, which should boost demand for single-family and multi-family rental properties.

This could be different for student apartment complexes, since university classes are remote and fewer overseas students will attend because of how the pandemic has slowed international travel and impacted immigration figures. Some students may just attend college close to home, for budgetary reasons.”

For centuries, cities have played a fundamental role for mankind. If in the future, people will not spend most of their time in a lockdown and the social distancing issue will be at least partially solved, then the cities, especially those close to countryside, lakes, mountains and seaside, will again become the political, economic, social and commercial core of our society, at least for a large part of the population. A large question mark however remains on large megalopolis that confine people in small apartments and are not located close to natural escapes, shifting the real estate demand for new, sustainable locations.

 Manuela Andaloro

(info@smartbizhub.com) 

(Sources: CNN, Il Sole24Ore, Linkiesta, New York Times, Financial Times, The Conversation, Globest, Fitch Ratings)

COVID-19 LENS: LONGEVITY ECONOMY AND GRETA GENERATION. FINTECHS MUST THINK BIG.

Built for growth, the global economic machine has been brought to a screeching halt. Thanks to intervention on an unprecedented scale, a full-scale meltdown has been averted – for now.

On January 30th, 2020, 43 representatives from 32 UK FinTechs, 25 Swiss banks and financial institutions, 7 VCs, 19 Swiss FinTech players, and many others gathered in Zurich: over 180 experts met to talk innovation, sustainability, and investments.

We didn’t know then that our world was about to change for a while to come – perhaps forever – and that soon we’d have put our discussions about innovation and sustainability to practice.

5th UK FinTech Mission to Switzerland event, 30.1.20, British Embassy Bern, DIT, Zurich Insurance

Key discussions of the day focused on social shifts driven by the longevity economy, age diversity, and ethics reshaping the financial world. Our aging society has been affecting consumer trends, opening new opportunities for businesses and workforce, while increasingly, 40-year-old millennials have been leading the charge of socially-responsible and sustainable investing, both ultimately driving the greater good.

COVID-19 has changed the ball game in today’s global economy, society, and impact investment strategies, calling into serious question our ability to reach the Sustainable Development Goals (SDGs) by 2030 – if that was ever possible.

With the current crisis in full development, many hope that a “mindset shift” will occur once a “new normal” is achieved. Both optimists and pessimists seem to agree that western balance sheets will at best go back to 2008 levels. In terms of debt-to-GDP, we’re talking of 10 percent or more, plus unemployment at 15-20 percent coupled with the strong possibility of populist-enforced cuts in foreign aid and the very likely scenario of social unrest across the first world.

The financial meltdown (currently deemed to be worse than that of 1987 or indeed, as some say, similar to the Great Depression of the 1930s) will also very likely reduce traditional foundation funding. 

It is interesting, and very difficult, to think now of the topics we discussed on stage only a few months back, and to do so, wearing a Covid-19 lens. Most of the challenges we discussed – whether concerning the aging population among consumers and investors as well as in the workplace, or the attitude of millennials towards social good – have only worsened. Possibly, two key aspects will emerge and might be the staple to overcome the ever-greater challenges ahead: digitization and sustainability, sparking new discussions around a new way to work and to engage in less-social contexts, and around the increasing need for impact and sustainable investing.

“As the Chair of the International Accounting Standards Board recently noted, the current approach ‘will not prioritize planet over profit.’ What is important for both sides of the for-profit and not-for-profit divide is not what people are saying – but what they are already doing to be socially impactful. What are we paying for?  And what is the incremental impact of each government or corporate dollar to each SDG? In other words, we need a metrics process whereby everyone is seriously involved and stakeholder actions are competitive, comparative and, predictive.

If not, we will continue to witness a decline in both the effective statistics measuring the SDGs as well as the effectiveness of programs designed to serve them, with an expansion of the funding gap. The danger is that, by 2030, the international community will have spent $6 trillion with little to show, particularly to teenage Swedish activist Greta Thunberg’s generation.”

Governments are pumping out capital to try to save economies and bridge financing gaps around the world, but it is apparent that government funding alone is likely to be insufficient to solve this immediate crisis. Nor can it be relied on as the only solution for the longer-term investments required to build stable, resilient systems that can manage a planet headed toward a population of 10 billion people within the next few decades. 

We know that climate change will disproportionately affect those at the base of the economic pyramid; as we are experiencing with coronavirus-related deaths and job losses, the same is true for this pandemic. The crisis has highlighted the case for purpose-driven, inclusive finance across both the environmental and social sectors, which is at the core of impact investing.

An encouraging takeaway from the crisis is that the push for private capital to act more decisively as a force for good in society and to shoulder a portion of the investment burden does not have to come necessarily with attractive returns.

 Visionary leadership needed.

As the COVID-19 pandemic continues to create uncertainty, many FinTechs are under stress on a number of fronts. Access to funding – especially for some early-stage ventures, as many investors focused on established FinTechs with clear business models –, recent interest rate cuts and the economic slowdown have radically changed many industry assumptions.

Yet, as the broader economy shifts from response to recovery, COVID-19 may create new opportunities for some FinTechs. For example, as social distancing has taken hold worldwide, there has been very strong growth in the use of digital financial services and e-commerce, as well as an increased interest in doing the “social good”.

Keeping an eye on future opportunities, FinTech companies may be forced to reexamine their missions and business models after COVID-19. A key question is how to leverage both existing and newly-developed assets to seize new opportunities in the future. It could be an opportune time to think big and act boldly. First and foremost, it is apparent that social distancing is accelerating customers’ use of online – especially, mobile – channels to view and manage their finances. Because many FinTechs are purpose-built for the mobile channel, they often excel in offering presentation, on-boarding, underwriting, and data visualization services, as well as in providing the right context for transactions. These capabilities will likely become even more relevant and important as a greater number of financial transactions are conducted through digital channels.

FinTechs can play an important role, perhaps through strategic partnerships across a broad ecosystem of players – including financial institutions, retailers, and the government sector – in distributing benefits to more vulnerable sectors of the population. Indeed, many FinTechs made it their mission to democratize financial services by providing basic financial services in a fair and transparent way. 

COVID-19 and the Longevity Economy

Despite the outbreak, the global population continues to age, and we expect global life expectancies to creep higher over the long term. Although we may see some changes in consumption patterns post-COVID-19, the key drivers of the longevity economy will likely remain intact.

The “Longevity Economy” is redrawing economic lines (AARP research), changing the face of the workforce, advancing technology and innovation, and busting perceptions of what it means to age. Bank of America Merrill Lynch projected in 2019 that the global spending power of those aged 60-plus would reach $15 trillion annually by the end of 2020.

Increasing longevity had, until February 2020, spurred unprecedented economic growth and new opportunities for personal fulfilment. Markets have been evolving to meet their needs and aspirations, offering new opportunities.

Aging adults are not only consumers – they are our only increasing natural resource, a talent pool that can power businesses and enhance the communities of the future.

Over the next few decades, baby boomers and Gen X will pass a significant amount of wealth (calculated at $30T prior to the COVID crisis) on the millennial generation. With very high spending power, millennials have started to reshape the investing and FinTech spaces to better align with their ethical values.

FinTechs for social good

“Life is what happens when you are busy making other plans.”  As we struggle to bring into focus the long-term impacts of a post-COVID-19 world, Lennon’s quote is a poignant reminder of the uncertainties that lie ahead for sustainable and responsible investors. 

We are now approaching an inflection point in the crisis, where savvy investors are fundamentally reassessing economic, environmental, social and, governance factors to adjust to the new normal.

The time has passed for small commitments, hyperboles, and delays in embracing sustainable investing. Now is the time for leadership, investment, and action.  Companies and investment managers that remain on the sidelines will sacrifice their opportunity to shape their own, and the planet’s, future.

Within 36 months, there will no longer be a discernable distinction between sustainable and traditional investing, predicts the Responsible Investor.

We can only take note and act fast.

Manuela Andaloro

(info@smartbizhub.com)

Sources: Global Geneva, the Guardian, Deloitte, Gig Economy Data, Responsible Investor.

Republished also on Corriere dell’Italianita’

UK FinTech Mission to Switzerland 2020