High energy prices, companies risk stopping production and redundancies (Economy Magazine, 14 September 2022 – Vittorio De Luca)

The latest Inps data show that this year’s use of the Extraordinary Redundancy Fund has increased by 45.65%. Widespread fears that this data will worsen rapidly, making appropriate government measures necessary.

Rising energy costs and the difficulty in finding raw materials herald a tough autumn for Italian companies. Firms which are grappling with multiple critical factors such as the pandemic aftermath, record inflation, the sudden (hopefully temporary) disappearance of important markets such as Russia and Ukraine and a looming new recession.

The risk is a general reduction and suspension of production  (which may affect companies across the board and not only the “energy-intensive” sectors) with a surge of requests for redundancy payments by companies.

Redundancy Fund 2022, record surge

The latest Inps data (Monthly Report August 2022 – INPS Coordinamento Generale Statistico Attuariale (General Statistical Actuarial Coordination)) on the redundancy fund are not reassuring. Between January and July of this year, recourse to the Extraordinary Redundancy Fund (which is the social safety net used for structural difficulties) increased by + 45.65% compared to the same period in 2021. This affected industry (+35.81%), construction (+34.88%) and commerce (+103.62%).

The widespread fear is that the reported figures will worsen rapidly, which makes appropriate government measures necessary.

Orlando reform

Recently, the government intervened to link up with the Orlando Reform which has been in force since January by introducing

• the ”Energy Decree”: i) This makes it possible for companies in difficulty (steel, wood, ceramics, automotive, agro-industry) to access the “exempted” Redundancy Fund, i.e., without having to pay an additional contribution (for Redundancy Fund equal to 9%, 12%, 15% depending on the subsidy); ii) extend the Redundancy Fund for the current year by 26 additional weeks, for companies that have already used social safety nets for up to 24 weeks in the mobile five-year period.
• with the Decree of the Ministry of Labour and Social Policies, no.  67/2022, the clarification of new reasons due to the market crisis and the shortage of raw materials resulting from the Ukrainian war and energy crisis.

Energy Decree bis, is the exempted Redundancy Fund back?

The exempted Redundancy Fund expired on 31 May, while the other two measures are set to expire at the end of 2022.

The difficult task of the government will be to find solutions which work with those recently adopted within a Budget that leaves little room for manoeuvre to support businesses and workers against the effects of inflation, the energy crisis and the Russian-Ukrainian conflict.

An encouraging sign is that the imminent Energy bis Decree , which is being prepared by the government, includes the reintroduction of the Redundancy Fund without additional contribution.

Without suitable measures, companies would be forced to contain costs by proceeding with layoffs. This solution, however, would not be painless for the state coffers, as it would entail a  NASPI increase  cost, and come at a high social cost.