The fashion industry is in a state of crisis

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The fashion industry is on red alert. Manufacturing companies working for brands have been struggling for more than a year. The first indications of a slowdown appeared in the summer of 2023, but the collapse in orders among material and component suppliers had already happened in the spring of that same year. As things stand, it is feared that the already dire statistics regarding company closures, layoffs, and use of the social safety net could get even worse because there does not seem to be any sign of a fresh start anytime soon.

The number of authorized layoff hours for leather and footwear in Tuscany, Florence, and Pisa has increased from over 865 thousand in the first half of 2023 to over 3 million in the same period this year. «The situation is concerning because, according to data from Infocamere, 220 leather goods manufacturing companies in the region have already closed in the second quarter of 2024. Additionally, the number of layoffs among the employees of Florence’s craft companies is rising. The Ente bilaterale dell’artigianato Toscano (Bilateral Agency of Tuscan Crafts) reports that between January and August of 2024, requests for over 1,600 employees (of which over 400 in Scandicci) were made, which is 170% more than during the same period in 2023», explained to MFF Simone Balducci, president of Cna Federmoda province of Florence, continuing: «In the short term, there will be a need for an extension of redundancy, a facilitated opening of bank credit, and the recognition of a fair price».

«Funding is needed to encourage small businesses to expand and merge, as well as retrain staff, with a focus on training in new technologies», stated the owner of a leather goods company, providing the restart recipe. Furthermore, since artisans can complete small orders, it is important to move past the notion of working with just one client, perhaps focusing on emerging brands».

Moving to another key regional district, that of the tannery of Santa Croce sull’Arno (Pisa), the restart still looks far. «The first signs of recovery could be seen by the first half of 2025 and are still linked to the overcoming of international geopolitical tensions, the decline in consumption in the eastern market, or the increasing logistics costs», added Roberto Lupi, vice president of the Association of Tanners, continuing: «We must continue to invest in training, research, and development». During the period between June 2023 and the same month this year, at least a thousand small businesses are thought to have closed in the Marche region. The avalanche primarily affected craft businesses and microenterprises that provide support to client companies. «Our fear is that, when the recovery comes, there will be no more support from the contractors», Andrea Caranfa, director of Cna Fermo, said.

The issue is cross-sectoral and impacts every industry, including footwear from Fermo and Civitanova, leather goods from Tolentino, apparel and accessories from Pesaro and Ancora, as well as shoe components (soles, heels, etc.) and leather companies. Fermo has seen a peak in business closures, according to data from CNA: 465 of the 1,430 business closures that occurred between 2019 and 24 (with 1,000 of those closing in the last 12 months) were in the province of Fermo.

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The number of hours of redundancy fund authorized by Inps for businesses operating in the leather sector during the first half of the year has increased by +212.1% when compared to the same period in 2023. Almost 2.5 million hours have been authorized, a number up by 107%, even more than the pre-Covid situation of the first 6 months of 2019. Now the problem, as pointed out by the director of Confindustria Fermo, Giuseppe Tosi, is the time frame before the restart.

«The companies are going towards the summer season, which has always been the weakest in terms of production. And the best-case scenario is that February/March will be the time of a turnaround. Solidarity contracts are in abundance, representing the pre-departure stage for redundancies. In 2024 we managed three; this year we are already at 15».

It is not any better in other regions. Giuliano Secco, the fashion president of Confartigianato Marca Trevigiana, claims that a significant number of small businesses in Veneto have decided to close their doors by the end of the year due to a lack of orders. This industry cannot compete if work is not sustained and competition from covert laboratories is not eradicated. The lack of staff will be an even bigger issue when things get back to normal.

In Emilia Romagna, in the Emilian district of Carpi, the president of the local Cna and regional vice president Tamara Gualandi estimates at least one hundred company closures from 2019 to today, with a strong escalation of the crisis in the last year.

«We attempt to advocate at the regional level through our fashion committee for national policies that uphold the fashion system, but we have not received any response as of yet. Furthermore, the state of affairs in San Mauro Pascoli’s footwear industry may be worse than it is in the apparel industry». Confirming the gravity, here are the words of Marco Piazzi, president of Cercal, the training center of the Romagna district of shoes. «Companies need support because there is a real possibility that the supply chain will collapse. We are already losing both small craftsmen and large companies, and to make amends, an economic policy intervention is needed. »

About 8,000 workers at 250–300 leather goods and footwear companies in the Naples–Caserta region of Campania have requested social shock absorbers, and there are still no signs of recovery. «We need soft loans, a derogation certificate, and to work on a project with a focus on the labels’ industrial strategies because the situation is critical», said Pasquale Della Pia, the Union Industrial Naples’ fashion advisor and footwear entrepreneur.

He then continued «In our view, institutions must now take the field to create opportunities for investment in the area. The supply chain exists, and so do training institutes; networks are needed for the interest of the big brands. The SMEs must not be left out of the aggregative theme; otherwise, we risk a disaster like that of 20 Whirlpool factories put together».

Moving on to Puglia, the demand is for innovation and aggregation. «In the region there are 3,500 fashion factories under ten units, with 24 thousand permanent employees, but if you look at the year 2000, they were 9,700, » explained Daniele Del Genio, entrepreneur in the sector and president of Cna Puglia, adding: «Despite this, exports have grown significantly, exceeding almost 900 million euros in 2023». Del Genio continued, emphasizing that a year-long moratorium on mortgages and redundancy fund in derogation is required in the near future. SMEs need to be trained in new procedures right away, including the use of Ai. Support for internationalization is also required. Furthermore, it is crucial to keep in mind that aggregations are now required rather than optional.

Sciuccati (Ambrosetti): «Brands need to go take the fiel d» 

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When is the recovery due? «I hope I am not mistaken, but some signs are already visible and are likely to consolidate in the first half of 2025. I think that the bottom, or the low point of the crisis’s V-model, was touched in the second quarter of this year», said Flavio Sciuccati, senior partner of Teha, The European House—Ambrosetti. In support of his thesis, the expert of Made in Italy and head of the business unit fashion & luxury of Ambrosetti cited historical sources of previous crises.

«This industry has never had negative periods lasting more than three semesters in the previous fifteen to twenty years. Macroeconomically, the interest rate cut and the US election result will also have a positive impact, stabilizing markets and dictating the pace of recovery that will still rely on China, the "great sick" of this historical moment. On the other hand», he emphasized, «the Italian fashion system may be primarily strengthened by the United States' return to consumption».

Between now and then, what will be the balance of casualties among the players in the fashion manufacturing chain? «This is my biggest concern and the actual sore spot. A 30% reduction in businesses and employees is estimated to result in significant and irreversible social damage in some areas of the country, such as Tuscany and Campania, where the suffering is particularly severe. The irony of a market restart is that there wouldn't be any labor to sustain the volumes and expertise required to meet the demand for new products, materials, and processes. The Italian supply chain, from material processing and finishing to the final product, is a strategic whole because it is an integrated system. and with multiple chains that intersect and run parallel. For this reason, we have to exert every effort to protect and preserve it. At the institutional, associative, and entrepreneurial levels, this message needs to be spread. The large Italian and French brands have the potential to assume a greater degree of responsibility than they currently do, as they will require these skills and personnel going forward, who now run the risk of permanently leaving the system».

Part of the solution also lies in the recent and innovative clusters. «SMEs in greater difficulty correctly perceive realities like Florence, Holding Moda, Minervahub, Pattern, and others as potential anchors of salvation or safe ports of landing; these poles will then try to seize opportunities and consolidate their own path of growth», Sciuccati concluded.

Metal accessories: the Florentine trade unions are calling for a national committee. 72% of companies are in crisis

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In addition to the industries of textiles, apparel, leather goods, and tanning, another area of great concern in Tuscany is the working conditions of those employed in the metal accessory sector, which includes the galvanic processes used in fashion products. Delegates from the top businesses in the industry have recently met with the Florentine provincial coordination of trade unions, Fim Cisl, Fiom Cgil, and Uilm Uil.

«In the Florentine area between Scandicci, Calenzano, and Sesto Fiorentino alone, one of the areas most affected by the crisis, 8,000 metalworkers were employed for fashion, with already about 25% of labor lost in the last two years, or 1,800 jobs. To give an idea, 8 thousand people would be like having a case similar to Ilva of Taranto»,  explained to MFF Flavia Capilli, regional secretary for Fim Cisl Tuscany. She then continued «Almost all the companies that use social shock absorbers are already running out of them, and the trend is to go towards extraordinary measures such as solidarity contracts. This also affects the territories, consumption, and commercial activities».

According to a note from the trade union organizations, 72% of craft companies and those in industries with trade union organizations currently use a social buffer. Capilli herself then spoke about the demands to the government. «The problem is not only local but also extended to regions such as Marche, Veneto, and Campania, since the supply chains are in these areas. For this reason, we ask the Mimit and the minister, Adolfo Urso, to further extend the perimeter of the committee of fashion to the category of metalworkers. In addition, we are also discussing with Confindustria Toscana to try to replicate the memorandum of understanding signed at the beginning of the year as a system pact to safeguard the quality and legality of the leather industry». (All rights reserved)