How to Do Business in Italy
The UK and Italy have a long-standing trade relationship, with goods worth over £14.5 billion making their way to Italy via several sectors.
If you’re looking to claim a share of the market in the EU’s third-largest economy, it’s important to know what you’re getting into. Here are some of the advantages and disadvantages of doing business in Italy.
Business Culture in Italy
Italian society generally bestows respect on status and hierarchy. Job titles and responsibilities are held in high regard.
Business relationships are often relaxed and open to discussions about family and personal interests. When meeting people for the first time, contacts will shake hands and exchange business cards.
Presentation is important. When doing business in Italy, make sure you look sharp in fashionable, formal clothing. Dark clothing is typically more acceptable in business settings.
Benefits of Doing Business in Italy
Here are some of the pros of expanding into the Italian market.
1. Modern infrastructure
Italy’s major cities are well-structured, with modern roads, metro systems, efficient light rail, and commuter train systems. Bus networks are also very reliable.
In Italy, air traffic is well-developed, with several international airports situated throughout the country. In terms of communication, there are over 59 million internet users. All in all, the sophisticated Italian infrastructure allows for a smooth flow of people and goods.
2. Strategically located
The country’s location in the Mediterranean region makes it a strategic gateway, ideal if you’re thinking of expanding into countries neighbouring Italy. It’s a central hub linking the middle, southern and eastern parts of Europe, both in terms of geographical location and the European Core Network Corridors (TEN-T) which runs through Italy. In addition, doing business in Italy can provide links to the MENA (the Middle East and North Africa) region.
3. Welcoming government policies
Italy’s regulatory framework encourages an open and diversified economy - suitable for exporters and investors looking to do business or expand their business into Italy. There are several corporate tax credits and incentives available to businesses, as well as bonuses and concessions available to those hiring permanent employees and young people.
4. Strong market
The Italian market is rich with opportunity, and the ease of doing business is relatively high. It’s the third-largest economy in the Eurozone in terms of GDP, and the eighth-largest in the world. A population of over 60 million people and a per capita GDP of almost $31,000 (USD), make the market fertile ground for businesses.
Italian households are among the least indebted in Europe, with a debt equal to 83.49% of disposable income, which is significantly lower than most European countries. This means that more disposable income is available to households for purchasing goods and products.
5. Euro currency
Italy uses the euro, the common currency among the bulk of European countries. This makes it easier to sell to other regional markets without much hassle.
You can save money and time on your currency exchange when you use a foreign exchange specialist. With Clear Currency you can make and receive business payments quickly and securely with our secure online platform.
Challenges of Doing Business in Italy
The downsides of doing business in Italy include:
1. Fragmented regulatory system
Each local authority independently determines how to implement national laws and regulations. As a result, procedures such as obtaining construction permits or electricity connections differ in each city. For instance, resolving commercial disputes might take two years in Turin, or four in Reggio Calabria.
Some cities will do better for one variable but rank poorly for another. To start a business or sell in different cities, you'll need to conduct considerable research and enlist local experts.
2. Language barriers
English is not widely spoken in Italy. Only 30% of the population can speak English. Since networking is a crucial part of Italian business culture, it's important to learn some Italian to establish stronger relationships with business partners and clients.
Contracts and official documents will be written in Italian, so unless you are fluent, it's wise to enlist the services of a professional translator.
Brexit has meant that goods transiting into Italy may now be liable for tariffs and duty payments. The “one-stop shop” seamless customs approach no longer applies when trading across borders into the European Union. You will have to contend with more complicated export processes. So, it’s important to understand the applicable UK/EU tariffs and rules of origin. For more information, read our article on Brexit and how it affects businesses.
4. Longer payment terms
Payment terms in Italy typically take much longer than in the UK. You can expect to draft contracts with 80-day payment terms. You can find out more here about some of the most common international payment methods.
In addition to long payment terms, it’s worth knowing that the Italian judicial system has lengthy processes for commercial lawsuits, which can take several years.
5. Corporate hierarchy
In Italy, decisions are made only by the most senior people in a company. Many businesses are family-owned, so major decisions are made outside the boardroom. Company management structures will often defer to another seat of power, often within the family.
You should be wary of wasting time engaged in negotiations with non-decision makers. The hierarchical system has also been said to contribute to corruption and tax evasion issues.
Italy is seen as an ideal destination country for UK exports; its pro-investment regulations, good infrastructure, strong currency, and market with higher disposable income present businesses with rich opportunities.
However, some of the risk factors include entrenched hierarchical systems, language barriers, and disjointed regulatory frameworks. Payments can also take much longer, and cross-border customs processes are no longer seamless after Brexit.
Manage your Italian money transfers with Clear Currency
Despite the challenges of doing business in Italy, the potential presented by the market is well worth exploring.
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