Market Monitor - Construction industry - Italy

市場監測

  • 意大利
  • 建築

2016年02月18日

Cooperatives and SMEs focused on domestic residential construction remain highly exposed to the risk of business failure.

  • The recession is expected to have bottomed out
  • Smaller players still face more troubles
  • Banks remain reluctant to lend

2016_MM_Construction_Italy_overview

The Italian construction sector accounts for 4.8% of the country´s GDP. The industry was severely affected by the economic downturn in recent years, with yearly GDP contractions between 2012-2014. Since the global credit crisis in 2008, Italian construction lost nearly 50% of production value and 69,000 employees due to the economic slump, decreased public spending, declined private investment and a profound credit crunch.

However, not all businesses have been equally affected by the downturn. Most large construction companies have proved to be resilient due to their portfolio diversification of infrastructure works and export orientation. For example, in 2014 construction turnover generated by exports increased 9.7%, partly compensating for the slowdown of domestic turnover (down 6%). While this mainly benefited larger players, construction cooperatives and consortiums focused on the domestic market and dependent on public works have been severely hit by deteriorating demand and decreasing bank loans. Another major issue are late payments from public bodies, with an average payment duration of 177 days and unpaid bills amounting to EUR 8 billion in 2015.

Small and medium-sized businesses focused on residential construction was the business segment most severely affected by the decline, due to decreased investment in private housing and restricted bank loans. The only exception was renovation works supported by government incentives.

2016_MM_Construction_Italy_GDP_growth

Since the end of 2014 deterioration in the Italian construction sector started to slow, as the economy rebounded modestly (GDP grew 0.7% in 2015). According to the Italian Statistics Institute ISTAT, contraction in construction production slowed down to 2.6% year-on-year in January-October 2015, after a 6.9% decline in January-October 2014. However, market indicators remain negative for investments in public housing and public infrastructure spending.

In 2016 the Italian economy is forecast to grow 1%, and construction production is expected to decrease only 0.5%. Investments are expected to increase 3.2%, driven by public investments and by investments for extraordinary maintenance of existing buildings (up 1.5%), while investments in new housing is expected to decrease again (down 3%).

Construction insolvencies still increased in 2015, among them three established building consortiums. Business failures are not expected to decrease substantially in 2016 and to remain on a historically high level – in contrast to the forecast for all Italian business insolvencies, which are expected to decrease 4% in 2016. Cooperatives and SMEs focused on domestic residential construction remain highly exposed to the risk of business failure. Trade payables and receivables days are expected to remain long, with no remarkable improvement in liquidity and in the payment performance of the industry.

Banks are still very restrictive when it comes to providing loans to construction businesses, while loans for private housing projects also remain subdued – although the European Central Bank´s Quantitative Easing programme is addressed to inject liquidity and encourage investments. Many businesses in the sector remain highly geared.

2016_MM_Construction_Italy_strengths_weaknesses

Therefore, our underwriting stance remains restrictive. It seems that the recession has bottomed out, but a profound recovery is not yet on the horizon. However, underwriting is more open for construction players who are export-oriented and less dependent on the domestic public sector.

When underwriting construction businesses, we pay special attention to the quality of the credit portfolio, the order situation and the coverage with prepayments, the amount and maturity of debt, and the ability of cash flow to cover investments and service debt. Financial leverage has to be coherent with available liquidity and equity consistency. With more sensitive and large cases, there are meetings with buyers to get a better insight into their business and financial strategies.

相關資料

免責聲明

Each publication available on or from our websites, such as, but not limited to webpages, reports, articles, publications, tips and helpful content, trading briefs, infographics, videos (each a “Publication”) is provided for information purposes only and is not intended as a recommendation or advice as to particular transactions, investments or strategies in any way to any reader. Readers must make their own independent decisions, commercial or otherwise, regarding the information provided. While we have made every attempt to ensure that the information contained in any Publication has been obtained from reliable sources, Atradius is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information in any Publication is provided ’as is’, with no guarantee of completeness, accuracy, timeliness or of the results obtained from its use, and without warranty of any kind, express or implied. In no event will Atradius, its related partnerships or corporations, or the partners, agents or employees thereof, be liable to you or anyone else for any decision made or action taken in reliance on the information in any Publication, or for any loss of opportunity, loss of profit, loss of production, loss of business or indirect losses, special or similar damages of any kind, even if advised of the possibility of such losses or damages.