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18/05/2020
Coping with the emergency

In the grip of the lockdown

 

The Covid-19 pandemic triggers an unprecedented economic crisis, affecting all sectors, including vehicle repair. In a rapidly evolving scenario, we take stock of the Italian government's measures to support businesses

 

Guido Gambassi, Matteo Prioschi - Il Sole 24 Ore journalist

The whole world under attack from a lower life form. In an unprecedented escalation, the Coronavirus epidemic, or Covid-19, in the space of a few weeks has gone from being - at least in the common perception - a Chinese phenomenon, to affecting all countries as the most serious pandemic in our recent history, which brings with it an economic crisis that we can surely define as unprecedented in recent decades. At the moment, the forecasts for the Italian GDP is in the region of -6% for 2020, and -10% for the second quarter. A crisis that will be much deeper than what was experienced back in 2008, as the Covid-19 outbreak affects almost all productive sectors across the board, as well as all countries around the globe, with a few differences in terms of timing, severity of effects and fallout. Effects and fallout that are barely imaginable, and certainly not quantifiable at the moment, with the number of people affected by the virus, and the number of victims changing from hour to hour, with stock markets around the world going up (a little) and down (way more often) at every announcement, and with a European Union divided between opposing attitudes towards the measures to be taken against the crisis, and whose intentions are not clear at the time of writing.

 

In the grip of a lockdown

In Italy, the various decrees by the Prime Minister that followed one another in the month of March, introduced gradual limitations to the movement of people and activities. On the basis of the principle of keeping all the necessary services open, car repairers were free to remain open, while after an initial permit, the production of rubber articles, including of course tires, and retreading activities were subsequently closed. However, most companies could still carry on their business, after informing the Prefecture about the need to work to provide services to other companies or bodies of strategic importance. The fact remains that due to the national lockdown, business was not as usual, at least for most workshops. According to estimates made by GiPA Italia at the beginning of April, 65% of all workshops were closed or intending to close shortly; by the end of March the figure had risen to 80%, although many activities decided to stay open. As far as the economic forecasts are concerned, GiPA estimates a 65% drop in turnover for the repair sector in March (despite the first week of regular activity) and even a 92% drop for the month of April. These two months alone project a 20% drop in turnover for the whole year. However, the actual loss will undoubtedly be much greater: according to several operators, in fact, in the month of May business will be 55% of normal workshop activity, with a recovery in June (84%) and July (91%). If the Italian economy should restart during May, estimates indicate a full recovery only by September, while it is very likely that many companies in the sector will remain open in August to try to limit the damage.

Within the vehicle repair sector, great uncertainties surround the seasonal tire change, fuelled by confusing news about the lawfulness of going to the workshop during the lockdown (is the seasonal tire change reason enough to leave home?) and conflicting positions on possible extensions of the legal deadlines to replace winter tires. On the other hand, with regard to mandatory roadworthiness inspections, according to Decree Law 18/2020 known as "Cura Italia" all inspections that were due by 31 July have been extended to October 31. 

 

“Cura Italia” measures to aid businesses

The "Cura Italia" decree, represents one of the few fixed points for companies in this period, and focuses on two fundamental elements: financial aid for companies and labour protection. About the first element, companies with registered office or operational headquarters in Italy and revenues in 2019 not exceeding 2 million euro have benefitted from a suspension been of the payments from self-liquidation due between March 8 and 31, relating to withholding taxes on income, VAT and social security contributions. Payments will resume on May 31. With regard to contributions payments, the employee's share has also been suspended, even though it was already withheld from the February payroll. The suspension goes from March 2 to April 30 and includes the activities of sectors particularly affected, as identified by Inland Revenue Resolutions 12 and 14 of 2020.  Furthermore, payment terms entrusted to collection agents, which expire between 8 March and 31 May, deriving from payment slips and enforceable assessment notices (income tax, VAT, IRAP) and social security institutions have also been suspended. Payments should restart by June 30. In favour of companies that carry out activities considered essential, a tax credit has been introduced equal to 50% of the expenditure for sanitizing workplace and tools. The benefit is granted up to 20 thousand euro per subject until the total ceiling of 50 million euro has been exhausted.

On the financial side, the guarantee fund for SMEs was strengthened until mid-December. The maximum amount of intervention has been increased to 5 million euro per company and the guarantee is granted free of charge. Debt rescheduling operations are also allowed against the granting of new finance for at least 10% of the previous amount to be repaid.

On the other hand, companies that do not have access to such guarantee fund will be able to benefit from liquidity support through Cassa Depositi e Prestiti. Maturities have also been suspended for non-performing debt exposures to banks and intermediaries. For non-instalment contracts and loans the maturity has been extended to September 30, if before and up to that date payments on mortgages and other loans repayable in instalments or lease instalments are suspended. The Mise (Ministry of Economic Development) has already ordered the suspension of Nuova Sabatini's instalments for the purchase of capital goods, while grants will continue to be paid out.

 

Protective measures for workers

To protect employment, Decree-Law 18/2020 introduced an ordinary redundancy fund (and the ordinary allowance for companies covered by the Wage Supplement Fund or sectoral funds), for Covid-19 and a maximum duration of nine weeks, which replaces the "standard" ordinary redundancy fund from February 23 to August 31. In addition, there is also the possibility of transforming any extraordinary redundancy fund (Cigs) already in progress into an ordinary redundancy fund (Cigo) for coronavirus, or redundancy fund by way of derogation. The use of the “Cigo” does not involve the application of the additional contribution to be paid by the company. This aid applies to employees in force as of February 23, even without the requirement of 90 days of actual seniority.

An indemnity of 600 euro has been set aside for coordinated and continuous collaborators and possible collaborators with VAT numbers for the month of March, which could be repeated in April. Employees hired after February 23 could instead benefit from income of last resort, whose characteristics and implementation must be defined by a decree of the Ministry of Labour. In addition, a ban on dismissals for objective reasons has been imposed for 60 days from March 17, as well as the suspension, for the same period, of any procedure for new or existing collective redundancies.

 

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