Milan’s Competitiveness

Milan case study

Professor Greg Clark CBE

Dr Tim Moonen
and Jake Nunley

April 2018
ii | Milan’s Competitiveness

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iii | Milan’s Competitiveness

Contents

Acknowledgements iv

Executive Summary 1

Milan: Past and Present 4

Milan City Competitiveness 7

Governance framework 7

Competitive climate 10

Agglomeration 12

Attractiveness to talent 14

Recommendations 17

Contributors 18

References 19
iv | Milan’s Competitiveness

Acknowledgements

The preparation of this report was supported by a group of ULI Europe and ULI Italy staff and members, including:

Lisette van Doorn, Chief Executive Officer, ULI Europe

Elizabeth Rapoport, Content Director, ULI Europe
Amanprit Arnold, Content Manager, ULI Europe

The authors wish to thank all those in Milan and Turin who contributed to the research through participation in workshops and interviews in autumn 2017,
as well as the ULI Italy Executive Committee and staff team. A list of those who gave exceptional assistance to the development of this report and the case
studies is on page 18.

Author

Professor Greg Clark CBE, Senior Fellow, ULI Europe

Dr Tim Moonen, Director, The Business of Cities
Jake Nunley, Research Associate, The Business of Cities

About this case study

This case study of Milan forms part of a ULI project titled Milan and Turin: Competitiveness of Italy’s great northern cities.
The information presented includes:

• desk research of (a) academic books, chapters, and articles about Turin’s urban economy; (b) independent reports by think tanks, universities,
observatories, and real estate organisations; and (c) media commentary about the city since 2015;

• a review of Milan against recognised measures of international performance;

• interviews with Italian urban specialists; and

• workshops in Milan and Turin on September 18, 2017, with ULI members and other public and private sector leaders.

The case studies of Milan and Turin, and the summary report, are designed to be read together.
1 | Milan’s Competitiveness 1

Executive Summary

Figure 1: Competitiveness framework

Governance framework Competitive climate Agglomeration Attractiveness to talent

Vision, strategy, and Costs and business Size and scale of internal Human capital, liveability, and
coordination investment market opportunity

Land use, planning system, Tax and regulatory framework Clustered specialisations Innovation, technology,
and density and enterprise
Political risks Institutional engagement
Infrastructure and services Brand, identity, and destination

This case study reviews Milan’s competitiveness Competitive city or productive Milan’s formal territorial governance system is
using a 12-point framework that consists of region? notoriously complex. However, civil society is
four main elements (see figures 1 and 2): very active, and civic and business leaders
Milan is commonly compared with and
have proved their ability to create teams and
measured against other urban economies at
• governance framework mount attractive projects focused on particular
a city level (population: 1.3 million), but its true
• competitive climate opportunities, including Expo 2015 and the
scale and dynamism fundamentally rest on its
• agglomeration; and recent campaign to host the European
wider region – Grande Milano, with a
• attractiveness to talent Medicines Agency. Metropolitan governance
population of 8 million.
reforms may eventually bear fruit and
It summarises Milan’s strengths and the threats visionary strategic planning may yet be
Grande Milano is highly diversified,
to its competitiveness, and provides possible to support Milan’s competitiveness,
complementing the inner city’s strengths in
recommendations for how to improve its but the pace of new projects planned by the
finance, consulting, media, and fashion with
competitiveness. private sector is helping create a new fabric of
innovative clusters in agricultural
cross-border, public/private co-operation that is
technology, agrifood, aerospace, clean
Milan’s competitiveness and confidence have moving the region forwards.
technology, energy, life sciences, medical
appreciably recovered over the past five years.
instruments, and smart technologies. The
After a period of inertia when other European In international measures, Milan’s quality of
regional dimension of competitiveness also
cities moved ahead of Milan, Italy’s capital of life continues to lag behind that of other global
emcompasses a very high-quality and
finance, commerce, and design has cities because of such factors as pollution and
globally competitive university system, several
benefited from improved city government and congestion from the outskirts to center. But the
international airports, and numerous small firms
a succession of public/private projects that are city also offers many less tangible lifestyle ben-
and industrial clusters of niche production.
now bearing fruit. As part of this renaissance, efits – not always recognised in comparative
The economic region is a comparative global
Milan is enjoying a large influx of talent and a studies but important to its appeal – including
powerhouse.
resurgent visitor economy, and is rebuilding and access to beautiful and natural surroundings,
restating the connection with its DNA of design, gastronomy, connectivity to other centres, and
knowledge, innovation, and culture. many housing and location options for families.
2 | Milan and Turin: Competitiveness of Italy’s great northern cities

Figure 2: Illustrative evaluation of City of Milan according to 12 competitiveness criteria

GOVERNANCE COMPETITIVE
FRAMEWORK ,
Vision and Polit
CLIMATE
gy ica
strate ination risks l
coord
e, m
us ste
d sy ity

Ta gula ewo
n
La ning ens

re am
x a to rk
fr
d

nd ry
an d
pl an Milan region
performance
e
and structur
ices

Costs ess
inves
busin ent
serv
Infra

tm

and
Size internal
of rket

destitity and
n
iden and,
and s

natio
ma

Br
cale
sp

rp y a ,
Cl iali

te og ion
e d
ec

ris n
us sa

en hol vat
te tio
re n

c o
te Inn
d s

Inst
engaitutiona
gem l n cap
ital,
Huma bility and
ATTRACTIVENESS
ent a
AGGLOMERATION e
liv ortunity
opp TO TALENT
Note: The wider Milan region is represented by the dotted lines. ‘Average’ represents the performance of Milan’s peer
cities – Amsterdam, Barcelona, Berlin, Brussels, Frankfurt, Madrid, Rome, Stockholm, and Vienna.

Milan’s industrial and design districts – The most recent cycle of progress means that
Brera, Isola, Lambrate, Tortona, and Certosa – the city of Milan performs well in terms of
illustrate the way the city is developing a infrastructure, and its improved leadership
high-tech, advanced manufacturing identity means the city’s land use and density are
and grounding it in well-defined districts and increasingly competitive. It also has a strong
neighbourhoods. The current cycle of land, brand, offers economic opportunity, and has a
transport, and development projects offers big greater appeal to talent than the wider region.
new opportunities to create highly desirable Conversely, it is at the regional scale that the
urban locations for talent and innovation. agglomeration effects become much more
visible. However, the region needs a series of
Milan’s competitive performance depends coordinated efforts in order to address its
substantially on the scale at which it is deficits in terms of fragmented governance,
measured. To illustrate this divergence, figure 2 connectivity, and land use, as well as its
shows an evaluation of the city of Milan against competitive climate. As a region, Milan has
European peer cities, but also features the the clear potential to become one of Europe’s
relative performance of the wider Milan region. most competitive locations.
3 | Milan’s Competitiveness

Recommendations role, including by encouraging A smart city and region

development of an Italian ‘system of cities’ • Milan has begun to make good progress
Communicating Milan’s competitiveness
that can spread to the rest of the country on smart city applications, inter-operable
• Milan has yet to tell its story to the world –
such benefits as supply chain development, systems, the sharing economy, open
that of a region that has transformed itself
business expertise, and specialist talent. innovation, urban services, and sustainable
from a centre of industry to a richly diverse
mobility. Because such elements are
post-industrial area. In particular, the
Making more use of soft power and soft important to its alignment with future
region’s breadth of assets and interlocking
governance thinking, Milan should move quickly to
clusters can be communicated much more
• Given the apparent obstacles to creating demonstrate how this transition to status
clearly. At this point in the cycle of recovery,
a more streamlined and effective as a smart city may improve urban
it is important to agree on and promote an
governance model in metropolitan Milan, productivity and the ability to
agenda about the kind of city Milan wants to
the city’s business leaders should prioritise accommodate entrepreneurship. Milan’s
become over the next 20 years.
‘softer’ governance solutions – public/ role as a ‘lighthouse’ city within the EU
private partnerships, project preparation Horizon 2020 programme is a good
• The public/private Osservatorio Milano
and delivery, and influence on and example of this potential.
benchmarking collaboration is an important
example-setting for the government.
step in measuring and monitoring Milan’s
Examples of catalytic projects that may help Partnership with Turin
comparative performance. More can be
build a regional alliance include big land and • Because they are the two largest cities
done to better document and communicate
real estate projects, university partnerships, in northern Italy and have improved
Milan’s advantages, however. The city needs
airport development, co-operation between connectivity and complementary strengths,
to continue expanding the data project
Milan and Turin, trans-Alpine trading there is a strong rationale for Milan and
in order to tell a clearer and richer story
initiatives, and joint agendas such as Turin to expand their collaboration and
(including in English) to a variety of
creating smart cities and promoting urban joint positioning while retaining their strong
international audiences about what the
innovation. Though longer-term strategic individual identities. Both cities would benefit
Milan region really is and why it offers
planning may also have a positive impact, from greater mutual understanding of the
unique opportunities.
it will be more important as a soft networks of companies and the flows within
governance tool to identify strengths, and between them. This would inform the
Milan and Italy, Milan and the Alpine
weaknesses, opportunities, threats, and kind of economic and R&D projects leaders
region
collaboration priorities rather than a in the two cities could undertake and the
• The economic gap between Milan and Italy
programme to be pursued by a segments in which the combined region
has grown dramatically in the past decade
metropolitan authority. could be promoted globally.
and is set to continue growing over the
next decade. This presents two imperatives.
First, Milan must differentiate its business
environment and level of transparency
from Italy’s less favourable business brand
through a clear promotional and
awareness-raising effort. Second, Milan
must collaborate with other cities in the
region to pursue the emergence of
northern Italy and the Alpine region as an
increasingly integrated economic unit. Doing
so will provide Milan with the advantages of
scale and visibility offered by leading global
regions. In the longer term, Milan may need
to secure nationwide support for its global

(ilbusca, iStock)
4 | Milan’s Competitiveness

Milan: Past and Present

Milan’s history as a European capital of Figure 3: Population of Milan relative to the surrounding Lombardy region (excluding Milan), 1931–2017
industry, commerce, design, and innovation
dates back more than 100 years. The capital 9,000,000
of the Lombardy region established itself as a
city of trade and technical know-how by hosting 8,000,000
five international exhibitions between 1871 and 7,000,000
1906. By the end of that cycle, it was also the
6,000,000
commercial and rail hub of northern Italy. Lombardy
5,000,000
In the 1950s, Milan became Italy’s ‘capital
4,000,000
of the miracle’ as the country boomed, and
established itself firmly as the national financial, 3,000,000
media, architecture, and industrial design
2,000,000
centre. The city’s emerging industrial export Milan
brands (Pirelli, Alfa Romeo, Falck) and fashion 1,000,000
brands (Armani, Prada, and Versace) gained
0
global renown. But in the 1980s, Milan began 1931 1941 1951 1961 1971 1981 1991 2001 2011
to face its own painful process of
Source: Istat
deindustrialisation. The city looked to replace
the lost heavy industry with growth in banking,
television and media, advertising, and During the 1990s, Milan failed to support the Milan’s performance today against
publishing. For a while, the motto ‘Milano da internationalisation of its small and global benchmarks
bere’ – ‘Milan is good enough to drink’ – medium-size enterprises (SMEs) or to provide In city benchmarking studies, Milan performs
was popular and summed up the city’s an enabling climate for business and well according to a wide range of influential
post-industrial confidence and glamour. investment. Infrastructure deficits grew. In global measures and ranks alongside other
2006, around the time when the core city large second-tier European cities.
At that time, Milan was still commonly regarded population fell to its lowest point since 1945,
and rated as the third city for business and the Organization for Economic Co-operation Because Milan’s spatial development and
culture in Europe behind London and Paris.1 and Development (OECD) warned that Milan governance are complex, international
But gradually the city became a victim of “seems to have lost part of its historical drive.”2 measures do not use widely shared
institutional inertia and political competition definitions of the city or city-region when
within and between governments, which Over the past five years, after the challenges comparing the city to others. This, combined
resulted in a lack of strategic thinking about of the financial crisis had passed, Milan has with the lack of data at any urban scale other
Milan’s future in the new global economy. begun to witness il nuovo rinascimento (‘the than the administrative city of Milan, means
Milan’s lack of strategic coordination together new renaissance’), energised by its hosting of that most international studies analyse Milan
with the relative and rapid improvement of other the 2015 Expo and propelled by its capacity as if it is a city of 1.4 million people.
European cities, resulted in the city’s steady for innovation and urban vibrancy. Since 2008,
decline in comparisons with other global cities its core has added nearly 100,000 residents –
over the next 20 years. most of them young people – and the city
Milan is extremely difficult to describe,
is now making steady and recognised
according to international standard
improvements in its physical and economic
patterns – world city, metropolitan
development. region, global city, global city-region. . .
. . . [This is] a geo-historical trait of
Milan and its regional background.
- Professor Matteo Bolocan
Goldstein, Politecnico di Milano, 20173
5 | Milan’s Competitiveness

Figure 4: The different spatial scales of Milan

Population Size Number of GDP Cities/regions of

municipalities similar economic size
Milan core city 1.4 million 182 km2 1 €61 billion Grand Lyon, Greater Manchester
Metropolitan city of Milan 3.2 million 1,575 km2 134 €144 billion Berlin, Barcelona metropolitan area
OECD functional urban area 4.2 million 2,640 km 2
252 €180 billion Melbourne, San Diego
Grande Milano region 7.5 million 8,100 km2 858 €250 billion San Francisco Bay Area, Greater Sydney
Politecnico di Milano region definition 12.5 million 30,000 km 2
1,500+ €400 billion Ruhr region
‘Northern Italian Powerhouse’ 16 million 46,000 km2 2,000+ €500 billion Greater London, Paris/Ile de France

However, the urban footprint and The many different definitions of the Milan region.
agglomeration of the functional Milan region
spreads much more broadly (see figure 4 and
regional map). The Milan metropolan area
accounts for a population of at least 3 million
to 4 million, many definitions identify the city’s
MILAN Verona
functional urban population as 7 million to 8 Venice
million, and a 2016 study by Politecnico di
Milano evaluating the real region put the Piacenza
population at 12.5 million. Turin
Parma

In terms of the wider zone of activity in the Po

Bologna
Valley, Milan is at the centre of an advanced Genoa
industrial region of nearly 20 million people. Core City of Milan
Metropolitan City of Milan
Currently, however, Milan’s advantages of scale OECD Functional Urban Area Definition
Source: The Business of Cities
and its ability to leverage the assets of other Grande Milano metropolitan area
Politecnico di Milano Urban Region Definition
nearby cities are rarely captured in international
The ‘Northern Italy Powerhouse’
comparative measures.

Partly as a result of these size and Figure 5: Frequency of appearances of European cities in benchmarking indexes and rankings in the
measurement issues, Milan’s prominence in top ten, January 2016 to July 2017.
international indexes is not matched by its
performance. It is the fifth most frequently City Total index appearances Percentage of top 10 rankings
ranked city amongst its ten peers, which Amsterdam 151 42
reflects its profile and status, but ranked last for
Berlin 140 39
the number of top ten positions it achieved in
2016 and 2017 (see figure 5). Stockholm 133 37
Madrid 126 26
Milan 110 6
Barcelona 109 30
Vienna 107 33
Frankfurt 94 23
Brussels 91 12
Rome 89 19
6 | Milan’s Competitiveness

Analysis of Milan’s performance against that Figure 6: Comparison of Milan’s performance with European peers across all global and Europe-wide
of its European peers across every publicly indexes between 2012–2014 and 2015–2017
available index since 2012 shows that Milan
continues to underperform compared with cities Amsterdam
that in functional size are smaller. This partly
Berlin
reflects the aforementioned issue of
measurement at the city scale, but also reflects Vienna
the fact that several of Milan’s key strengths – Stockholm
creativity, culture, design, and innovation –
Frankfurt
are not easily captured in comparative and
objective terms. Barcelona Milan’s relative
improvement
Madrid in indexes
performance vs.
Even so, this analysis shows that of these ten
Brussels peers since 2014
cities, Milan has recorded the largest relative
increase in overall city performance between Milan 2012-2014
2012 and 2017 (see Figure 6). Even though 2015-2017
Rome
the benchmarks underestimate Milan’s size,
-1 0 1
they do capture its recent progress and
improvement.
Source: The Business of Cities

Since 2016, Milan has performed well in

indexes measuring human capital, destination Figure 7: Five areas where Milan outperforms and underperforms compared with its European peers
and brand reputation, connectedness, and
shared mobility, but it tends to perform less well
Index Ranking
in indexes assessing governance, sustainability,
educational attainment, and adaptation to the Euromonitor International City Destinations Ranking 27th of 100
digital economy. Resonance World’s Best City Brands 26th of 100
Arcadis Sustainable Cities Mobility Index 18th of 100
The Osservatorio Milano, a new joint effort
2thinknow Consulting Innovation Cities Global Index 29th of 500
between the municipality of Milan and industry
partners such as Cushman & Wakefield, QS Student Cities 33rd of 100
Google, and Mastercard, has been established IESE Cities in Motion Index: Governance 79th of 181
to benchmark the competitiveness and
Deutsche Bank Mapping the World’s Prices 2017: affordability 37th of 47
attractiveness of the city compared with others
in Europe. This is an important step in Brookings Redefining Global Cities: higher education attainment 86th of 123
identifying and communicating Milan’s Nesta, et al.: European Digital City Index 46th of 60
competitive advantages. The scorecard TomTom Traffic Index, global 118th of 189
contains more than 200 indicators measuring
attractiveness in such areas as human capital,
innovation, smart technology, equality, and
accessibility. The report concludes that while
the city must work to continue to attract tourists
and investors, it must also become more green,
more smart, and more liveable for its residents.
7 | Milan’s Competitiveness

Milan City Competitiveness

In this section, Turin’s competitiveness is assessed using a framework that consists of four main elements:

• governance framework
• competitive climate
• agglomeration; and
• attractiveness to talent

Governance framework

Vision, strategy, and coordination

Over the past 15 years, Milan has witnessed an improvement of city Most observers doubt that Milan can create the local government buy-in or
government, which has overseen and approved a process of regeneration national government support to move forward with a shared metropolitan
and transformational projects that are now bearing fruit. growth strategy any time soon. On the one hand, this lack of
coordination generated costs and delays which hamper the city’s
On the other hand, however, Milan has long been described as an competitiveness. These include the costs of competing land uses, the slow
‘unthinking metropolis’ because of the inherited complexity and pace of implementing infrastructure upgrades, and the obstacles to
dysfunction of the wider region’s governance framework.4 Recent years growing clusters strategically. On the other hand, in this vacuum, Milan’s
have seen the emergence of formal metropolitan-scale initiatives, but private and nonprofit sectors have become highly engaged and active in
these interventions do not yet translate into co-ordinated implementation mounting projects that encourage urban restructuring and foster
of a shared vision and strategy for Milan’s future. emerging clusters.

Milan’s multi-tier governance system is a complex one: there are 134 Land use, planning, and density
municipalities in the Metropolitan City of Milan (which is the same size as Milan is a medium-density city by European standards, with a centre of
Greater London), and 100 more in the functional region.5 But there is no gravity that is moving slightly northwards. The core city of Milan is nearly
agreed definition of the metropolitan area nor any fully fledged form of twice the size of central Paris and central Barcelona, but less than half as
metropolitan government. Milan’s economic and spatial footprint continues dense. The area defined by the new Metropolitan City of Milan boundary
to outgrow the governance framework, resulting in fragmentation of key is almost identical in size to Greater London, but is home to only 40 per
systems, such as transport, and perpetuating the gap between core and cent of the population. At this limited metropolitan scale, Milan’s density is
peripheral Milan.6 comparable to that of cities such as Brussels and Greater Manchester.

Multiple attempts have been made to launch a metropolitan-level Over the past 30 years, the suburbanisation of population and
strategic plan, including the 1961 Piano Intercomunale Milanese (PIM), re-urbanisation of jobs has created a complex set of dynamics in the Milan
a voluntary effort, and the 2006 province-led City of Cities initiative.7 region. The functional economy stretches northward to the Alps and has
The establishment of the Metropolitan City of Milan triggered the creation a polycentric urban form.10 Whereas the core and some northern parts of
of a new strategic plan, but it lacks detail on execution and, crucially, has the metropolitan area are characterised by a medium-density urban form
no financial mechanism.8 The plan has been followed by a simplified (reaching up to 7,200 inhabitants per square kilometre in some city centre
Metropolitan Manifesto in an attempt engage local governments, districts), in the south, low-density settlements are more common (with an
universities, and private companies.9 average density of 300 inhabitants per square kilometre).11

Citizen political behaviour in Milan has become less tribal and

more pragmatic. Milan is now leading the development of the
region with catalytic urban projects.

- ULI workshop participant, September 2017

8 | Milan’s Competitiveness

The Milano Porta Garibaldi railway station. (Sharon Gallo, iStock)

Density is increasing because of population growth, migration, and an 1 million square metres and are being unlocked by the forthcoming
increasing number of city-centre redevelopment projects that encourage Circle Line, which is one of the key rail upgrades in Metropolitan Milan
density and more sustainable urban living. Most international migration has over the next decade, benefiting from around €1 billion of national rail
taken place in the outer suburbs and fringes, creating pockets of density investment. The project promises to have a catalytic effect in
well outside the historic core.12 showcasing a different model of human-scale, cycle-friendly urban
living.
Projects totalling well over 2 million square metres are currently under
construction or in planning in Milan, many of which promote sustainable, • The strategically located Expo site is being converted to a world-class,
higher-density urban living. Several of these projects are in the northwest 1 million-square-meter science and technology park under the man-
of the city, within the new Metropolitan City boundary.13 Two key agement of a company 70 per cent owned by the city and Lombardy
redevelopment projects are underway or recently completed: region. Located just inside the green belt, the park is already set to
have three key anchor institutions – Human Technopole, the scientific
• The Scali Ferroviari di Milano project is engaging multiple tiers of campus of Università degli Studi di Milano, and a large hospital. The
government to re-activate at least seven disused areas of railway land scale and quality of this future urban district could become a reference
by adding new mass transit infrastructure, affordable housing, and point for Milan’s revival and leadership.15
sustainable mixed-use development.14 These areas add up to well over
9 | Milan’s Competitiveness

A number of other projects also have added or are set to add Infrastructure and services
much-needed residential and commercial space: Milan has seen its infrastructure improve significantly in recent years and
has started to catch up with leading peers in Europe. In terms of transport,
• Porta Nuova, situated just one kilometre from Milan Cathedral, is a the city has co-invested not only in new Metro lines and new highway
mixed-use project located in an abandoned industrial district between links, but has also upgraded existing Metro lines and extended high-speed
two of the region’s main transport hubs.16 Completed in 2014, the rail links to Milan-Malpensa Airport and Brescia to reduce travel times.
project combines offices with retail space, culture, and a walkable Milan now has the strongest transport and mobility system in Italy, though
lifestyle. The public plazas have provided an important source of foot its scores in a European and global context are still moderate.25 Digital
traffic and enabled visitors to travel easily from one popular section of infrastructure is also catching up: the central city is the site of a pilot of
the city to another.17 the new Italian 5G network and has 100 per cent coverage of fibre to the
home.26
• City Life, just three kilometres to the west, is a major residential and
commercial development located on the former grounds of Milan’s Perhaps the biggest boost to Milan’s connectivity is the new M5 Metro line
trade fair.18 It is well served by public transport links due to its linking Bignami in the north of the city to San Siro in the southwest.27 It
proximity to new M5 line stations, and two of the towers are Gold provides the only direct Metro link to the San Siro stadium, and improves
certified under the Leadership in Energy and Environmental Design access to key centres such as the Bicocca University and the Niguarda
(LEED) program.19 hospital.28 The new line has unlocked the historic neighbourhood of Isola,
an underserved quarter which is now the focus of redevelopment, and
• Milanosesto, located in the suburb of Sesto San Giovanni, is one of provides the first Metro station in the Sempione area. The line establishes
the city’s largest residential projects. It will provide more than 8,000 the Garibaldi district as a key national and international transport hub,
residences, plus feature hotel, office, and retail space.20 allowing interchanges with the suburban and regional rail network and the
Malpensa Express.29 The 2011 extension of the M3 line from Maciachini to
• Milano Santa Giulia is the city’s largest residential project. Located Comasina has created a similar interchange hub adjacent to the northern
about 15 minutes by car or Milan Metro from the city centre, the railway station in Affori FN.
1.2 million-square-meter former industrial zone is located near a
motorway, rail, and Metro stations.21 The project will host Sky’s
Metro lines in relation to the Milan central business district. The M4 line
European headquarters, other offices, a retail and entertainment
is scheduled to open in 2022.
district, and enough housing for about 60,000 people.22 It also aims to
be the first neighbourhood in Italy fully meeting LEED standards and
fully equipped with smart technology.23

The combined effect of these projects is likely to be substantial, allowing

Milan to accommodate the next cycle of demand and demonstrate its
embrace of 21st-century urbanism. Together they offer significant new
opportunities to build desirable urban sites for talent and to foster
innovation.

At the same time, there are also plans to redevelop Milan’s inner suburbs.
The Suburban Plan is primarily focused on the maintenance and
reclamation of public housing in five districts. The €300 million plan also
prioritises improving transport connectivity and mixing land uses to ensure
that the suburbs can continue to be attractive relative to the dynamic
changes happening elsewhere in the city.24
10 | Milan’s Competitiveness

The delayed 21-station, 15-kilometre M4 line is due to open in 2022 and Despite these important upgrades to the rail system, 58 per cent of trips
should provide a functional and cost-effective connection between Linate between the central city of Milan and the metropolitan area are still made
Airport in the east of the city to suburbs in the west. The M4, which will by car, and the percentage is higher at the regional scale. Investment in
also connect with the M1 and M2 In the city centre, is likely to make a big the road networks has emerged as a strategic priority. The new
difference in airport access across the metropolitan area.30 The carrying 62-kilimetre BreBeMi motorway, designed to provide an alternative to
capacity of the new M4 and M5 lines is much greater than that of the the previous motorway between Brescia and Milan, opened in 2014.35
original lines – 24,000 passengers per hour in one direction for the M4 The Milan Outer Eastern Bypass (TEEM) also reduces travel time along
and 18,000 for the M5 – which will help provide more efficient throughput a key section of ring road to 15 minutes from 25 minutes to an hour.36
to key job districts.31 Despite this progress, suburb-to-suburb travel remains a key deficit and is
a priority for the Sustainable Urban Mobility Plan moving forward.
Investment in Milan-Malpensa Airport and inter-city rail links to Treviglio
and Brescia are also significantly reducing journey times and the need to An important dimension of the next cycle of Milan’s infrastructure is the
change trains. These additions bring several strategic locations within a adoption of smart and secure digital systems that improve transport flows,
40-minute journey and boost capacity for both passenger and freight infrastructure safety, and digital connectivity. This has been a focus for the
services.32 At the regional level, Milan will be connected to Genoa via a city in recent years.
new high-speed rail link that will enable passenger trains to reach speeds
of up to 250 kilometres per hour. This link will also shorten the journey Overall, recent infrastructure additions have helped the central city of Milan
time for cargo traffic coming from east of the Mediterranean.33 Meanwhile, catch up with other leading European cities. Infrastructure is no longer
the new Ceneri Base Tunnel will offer a faster rail connection between viewed as a competitive disadvantage. In the next period, the city will need
Zurich and Milan beginning in 2020, shortening the journey time to just to continue the rate and speed of infrastructure investment, including
under three hours.34 through use of new financial tools and joint ventures.37

Competitive climate

Costs and business investment International perceptions regarding business costs and business
The high or uncertain costs of labour, energy, and rents, as well as high or investment in Milan are partly shaped by the city’s association with Italy’s
uncertain indirect costs, have been a disadvantage for Milan in the past, business brand. Italy is only ranked 46th of 190 countries for ease of doing
but have become a more favourable factor in recent years. National business by the World Bank, and 54th of 180 countries in Transparency
reforms in 2014 and 2015 to ease rigidities in the labour market and International’s Corruption Perceptions Index.
reduce the costly barriers to hiring and firing workers have begun to make
labour costs more competitive.38 The recent Industry 4.0 initiatives mean Tax and regulatory framework
that companies that invest in technological assets can also receive Italy’s tax and regulatory framework has historically constituted a
depreciation incentives on their expenses, as well as tax credits for competitive disadvantage for Milan. High regulatory burdens and
incremental expenditures on research and development. Together these insufficient regulatory quality have weakened the business and investment
offer big incentives for corporations moving to Italy. climate.42 Tax rates have been one of the three most commonly cited
concerns about business in Italy.43 But recent reforms targeting
Overall business costs have become more competitive in Milan relative improvement have had a wide positive impact, and in some areas of
to the inflated costs in other European cities. Stable residential and office regulation Milan now performs well. Those familiar with doing business
prices have increased affordability for businesses and boosted activity in Milan also have much more positive perceptions, but Milan faces a
in Milan. Housing prices in Italy have fallen more than 20 per cent since challenge in differentiating itself more clearly in the international arena.
2008, and renting a house costs on average 12 per cent less than in
2012, although the rental market is small.39 Office space take-up from
January to September 2017 was the highest ever recorded in the Milan.40
Business investors have increased their activity and their confidence
has risen in response to the recent introduction of reforms, ongoing signs
of an economic recovery, low interest rates, and strong liquidity.41
11 | Milan’s Competitiveness

Italy ranks 46th among 190 countries worldwide for ease of doing resulted in a hung parliament, and the country’s two populist parties –
business, up from 50th, although in terms of paying taxes (e.g. time the anti-establishment Five Star Movement (5SM) and the far-right League
required to comply with major taxes, total tax and contribution rate, and party –emerged strongest.47 Following the agreement of the two parties
ease of postfiling) it ranks 112th.44 Numerous reforms have been on new parliamentary speakers, the likelihood of a populist coalition
introduced since the financial crisis to improve regulation, digitisation, government favouring changes to the country’s role in Europe is rising.
transparency, and dispute resolution mechanisms,45 and in some cases Some unexpected outcomes of this might have implications for Italy’s
these have put Italy on a par with western Europe and US arrangements. long-term future in the Eurozone and its ability to service its
Tax rates have also been reduced to encourage investment: in 2017, euro-dominated debt.48
the corporate tax rate was reduced from 27.5 to 24 per cent. Additional
incentives to replace taxes on individual incomes or capital gains earned Political reaction to the steady influx of migrants and refugees presents a
abroad with a lump-sum payment are also helping attract people who have second source of risk, as anti-EU sentiment grows.49
left the country, company executives, and portfolio managers.
A third source of risk is the ongoing weaknesses of the Italian banking
Political risks system. In 2017, the Italian government stepped in to rescue Italy’s
Though Milan exposure to political and geopolitical risk is moderate, three third-largest bank, but concerns regarding insolvency and a potential
ongoing areas of risk deserve mention: showdown between the Italian government and the European
Commission remain.50 New rules that bondholders must take the hit in
• national constitutional reforms and short political cycles; the event of a public bank bailout puts a large number of household retail
investors at risk.
• national migration challenges and the rise of Euroscepticism/
populism; and These political risks are not of Milan’s making, but as Italy’s main centre
of business and finance, the city is affected by how well these risks are
• structural challenges to the banking system. managed by national and supra-national governments. Milan’s challenge
is partly to support good national policy, and partly to demonstrate that its
The challenges Italy faces in delivering constitutional reforms have raised own strong systems of city government, management, and transparency
political concerns that affect Milan.46 The most recent general election insulate it from national risks.

The Galleria Vittorio Emanuele II, the oldest shopping mall in Europe. (scallger/iStock)
12 | Milan’s Competitiveness

Agglomeration

Size and scale of internal market

Milan has the competitive advantage of a large customer base and
central strategic location in Europe. It is first and foremost a large market
in its own right: a metropolitan region with 7 million to 8 million people,
with more than 280,000 firms in the core Metropolitan City and another
100,000 firms beyond. The metro region has the second-highest gross
domestic product in continental Europe and enjoys a 40 per cent
productivity advantage over the rest of Italy because of its concentration
of finance and business services.51 It is, in effect, the economic nucleus of
the Po Valley (with 16 million people) and the whole of northern Italy region
(with 26 million people).52 The number of companies and consumers to
serve is a major reason that 3,000 multinational companies are located in
the region, generating €169 billion in annual turnover.53

But Milan’s market size and scale are constrained by diseconomies that
arise at this wider scale. The region’s development pattern imposes
significant transport, public service, and environmental costs. The region
has high mobile connectivity but poor internet speeds at the regional
level and a smaller digital economy than its peers.54 The size and scale of A stylised map showing the economic dynamics among Milan and other cities in Lombardy.
Milan’s market has also been constrained by the financial crisis, which Source: MiWorld/Politecnico di Milano.
hit demand in the Lombardy region particularly hard.

Clustered specialisations The annual Milan Fair, which hosts 37,000 enterprises from across
The core city of Milan has internationally competitive clustered northern Italy, makes it possible for smaller businesses located in industrial
specialisations in three core sectors: finance and consulting, fashion and districts to negotiate deals, absorb economic disruption, and bounce back
design, and biotechnology and life sciences. over the long term.

At the regional level, Milan possesses a wide range of mature, specialised Milan’s finance cluster consists of 10,000 companies which employ
clusters, many of which intersect. more than 70,000 people.56 Almost all of Italy’s most important banks are
based in Milan, and numerous mergers have led some Milanese banks to
become important international players.57 The cluster now hopes to benefit
from relocation of some of London’s financial institutions after Brexit in
Milan’s strength lies in the coexistence of different 2019, with strong support from the national government.58 Meanwhile,
development engines – research, universities, multinationals, Milan’s inherited expertise in manufacturing, business, management, and
the creative industry, high value-added services – together finance has fostered a competitive advantage in consulting, most of which
with a strongly interconnected entrepreneurial fabric that is clustered in the city centre.
characterizes the Grand Milan, the ‘infinite city’. . . .
A dense entrepreneurial fabric has always been the key Milan also enjoys a long-established competitive advantage in fashion
to Milan’s success. and design. Most firms in this field are small, and many are spatially
- Carlo Sangalli, concentrated in Navigli in the Ticinese neighbourhood, encouraging
President of the Milan Chamber of Commerce 55 interaction and trust among fashion houses and designers. Other
important design districts include Brera, Isola, Tortona, and Certosa.
13 | Milan’s Competitiveness

Milan’s Navigli design district. (Max Pixel)

Overall, the cluster benefits from three specific assets: the excellent However, a strong institutional presence has not yet translated into rapid
organisational capacity of firms; networks of SMEs able to form flexible commercialisation or technology transfer partly because several of the
production frameworks and produce niche goods; and a local textile sector leading hubs are spatially isolated and often compete against one
that provides high-quality raw materials to designers. Today, there are another.61 Still, hopes are high that Milan’s emerging expertise in food
13,000 fashion enterprises in core Milan, and the fashion industry innovation, along with the Italian government’s decision to turn the Expo
generates €13 billion in annual revenues – about 20 per cent of the site into a research centre dedicated to big data and genomic science,
city’s GDP. signals a change in scale and co-operation across the cluster.62

Together, Milan’s industrial and design districts illustrate the way the city Institutional engagement
is developing a high-tech, advanced manufacturing identity and Institutions in Milan engage strongly with the economy. In 2017, the Italian
grounding it in visible, well-defined districts and neighbourhoods. But government established a task force – involving city authorities, the Bank
two factors combine to limit the success of the design cluster in of Italy, the national Revenue Agency, the Milan Chamber of Commerce,
international markets: and the Italian Commission for the Stock Exchange – to bring firms and
banks to Milan post-Brexit.63 The City of Milan and the Chamber of
• Links between firms and universities need improvement. Companies Commerce collaborate closely to support businesses and to establish new
are often unaware of what research is being conducted at universities, initiatives and incubators that bring together the public and private sector
and university researchers are unaware of what innovations are needed more effectively.64
by firms. Analysts point out the need for more joint R&D facilities with
state-of-the-art resources.59 The Chamber of Commerce is especially active, employing five
companies dedicated to supporting the business and market system.65
• The northerly dispersion of design firms operating outside the fashion These companies help internationalise SMEs,66 reach out to Latin
industry limits the ability to translate small-scale expertise into American companies,67 support scientific and technological development,
large-scale commercial success. and provide information and training to new entrepreneurs.

Milan’s biotechnology and life sciences cluster is a third important driver Across the region, many of the public and private initiatives in place
of the city’s competitiveness. Milanese biotech firms have built strong links overlap and duplicate one another. Milan would benefit from a single locus
with the health care system, and the city now hosts a number of renowned of business leadership that can channel a single voice about how best
scientific research institutions, such as the IFOM-IEO campus, the biggest to manage agglomeration and economic development, as is done by the
molecular oncology research centre in Europe.60 These strengths have Amsterdam Economic Board and the Stockholm Business Region.
given rise to successful spinoff companies such as Genenta and have
helped Italy rise to second in Europe in the number of biotech publications.
14 | Milan’s Competitiveness

Attractiveness to talent

Human capital, liveability, and opportunity Urban sprawl, longer commutes for workers, and the traffic that results all
Milan’s jobs base, amenities, climate, and lifestyle consistently attract erode Milan’s quality of life and shape international perceptions of the city.
domestic talent and provide good opportunities for existing residents. But The introduction of a daytime city-centre congestion charging scheme in
compared with European peer cities, its quality of life is compromised by 2012 was a welcome intervention, but congestion and air pollution remain
traffic congestion and pollution from the outskirts to center, and a lack of high.69 The scheme has reduced traffic 28 per cent, concentration of
access to key public amenities such as high-quality education and green PM10 (particulate matter) by 18 per cent, and carbon dioxide emissions by
space. A 2016 PwC study placed the city third among 30 global cities for 35 per cent.70
health care, and seventh for rent affordability. But the city performed much
worse with regard to crime levels, access to public parks, well-being of Milan’s dynamic and productive labour market and its specialisation in
older people, and opportunities for the younger generation.68 high value-added sectors are big drivers of the city’s appeal. The city’s
unemployment rate, at 8.4 per cent, is far lower than that of Italy, 12.7 per
cent, and the Eurozone, 11.6 per cent.71 The city’s reputation for style, its
Key areas of improvement required to strengthen Milan’s relatively low home prices, and 2013 legislation that facilitates visas and
performance in international rankings more flexible employee contracts have all increased its appeal to
• Pollution, especially PM2.5 (particulate matter) pollution entrepreneurs.72 But the wage gap in Milan compared with other leading
• Traffic congestion, especially during the morning rush hour European business cities is high, and the departure of young and
• Access to public services and parks well-educated Milanese residents for Germany, France, and the UK
• Educational attainment constitutes a worrying trend. In 2015 and 2016, the Lombardy region had
• Internet speeds the most emigrants in Italy, and over one-third of those choosing to move
were well-educated 18- to 34-year-olds.73

A street in Milan. (querbeet/iStock)

15 | Milan’s Competitiveness

In addition, skills and broad-based educational attainment of Milan’s There are now signs of a step change in Milan’s approach to innovation
population leaves a lot of room for improvement: of the 23 largest and a rise in the number of startups.78 These signs include:
metropolitan regions in Europe, Milan ranked last in terms of higher
educational attainment, at 19.2 per cent, according to a Brookings • The attraction of leading information technology firms such as Google,
study.74 This is despite the fact that the city is home to several renowned Microsoft, and Samsung.
universities that are among the best in Europe. In the QS World University
Rankings, Bocconi University ranked fourth in Europe for economics and • The provision of strategic locations for innovation. The former Expo
sixth for business and management, while the Politecnico di Milano ranked site is being converted into a complex of seven new research centres
seventh in the world for design and 14th for architecture. focusing on medical genomics, agriculture and food science, and big
data analytics.79 This is intended to create spillovers with the IFOM-IEO
However, Italian government talent initiatives have started to have an campus and the San Raffaele hospital.80
impact. A five-year tax exemption for highly skilled workers who return to
Italy after more than five years of working abroad has already benefitted • An improved regime for startups. In 2016, the Italian Ministry of
4,500 people, while tax exemptions for researchers that have worked Economic Development launched the €13.7 billion Industrial National
abroad have brought 2,000 people back to the country.75 There is Plan 4.0 to support digitisation.81 The plan enables startups and SMEs
optimism that when the final terms of the Brexit deal become clearer, investing in new assets to apply for hyper- and super-depreciation,
Italian emigrants and startups inside and outside the EU will consider grants them a 30 per cent tax deduction for investments of up to €1
relocating to Milan in larger numbers.76 million in innovative start-ups and SMEs, and provides a 50 per cent
tax credit for R&D investment.82 Many recent legislative changes to visa
Innovation, technology, and enterprise and tax rules have also been designed to foster innovation.83
The Milan region inherits a strong culture of innovation and
entrepreneurship. More than a decade ago, the OECD cited Milan’s The city was home to more than 900 startups in 2015, many in software,
substantial but under-exploited capacity for innovation as a factor in the IT, and science, and this figure has risen since then.84
city’s declining competitiveness.77 Recent government-led initiatives
designed to promote innovation hold promise, and numerous institutions The main perceived challenges to Milan’s innovation ecosystem are:
are tapping into new innovation opportunities. But several challenges
remain, and investment in startups is still low compared with Milan’s • Ensuring that bureaucracy does not deter business startups, especially
European peer cities. by entrepreneurs for whom Italian is not their first language.85 Some
legislative changes have not had the desired effect because of
ambiguity regarding what constitutes an ‘innovative startup’.

In order to maintain its southern European leading role, Milan

• Improving networking between coworking spaces and startups.86
needs to upgrade high-level business services, as well as to
invest in both its traditional assets and innovation.
• Improving the avenues and incentives for universities to collaborate
- Dr Simonetta Armondi and Dr Stefano Di Vita, and interact with SMEs.
Politecnico di Milano
• Developing a more defined startup culture and a clearer grasp of what
makes a startup successful and competitive. Recent increases in the
number of accelerators and venture capital firms will help, but the size
and experience of Italian venture capital firms will need to grow.87
16 | Milan’s Competitiveness

The Piazza del Duomo (Cathedral Square) in Milan. (bennymarty/iStock)

Brand, identity, and destination Milan’s tourist brand (including luxury tourism) is also improving in the
In 2006, the OECD advised Milan that it should develop a strategic current cycle. Over the past seven years, the number of nights spent by
branding approach to enhance its international image.88 In the 12 years tourists in Milan has increased by 60 per cent, and the 2015 Expo was a
since, Milan has responded with a variety of initiatives, led by the city big boost to Milan’s visibility, attracting 5 million international visitors.92
government and other public and private agencies across a range of In 2017, Milan overtook Florence to become the third-most-visited
sectors and with different outlooks and interests.89 Milan has begun to destination in Italy.93 But visitors only stay for 2.4 nights on average, often
improve its profile as a highly attractive city surrounded by a dynamic, just to attend one-off fairs or events, partly because awareness of and
distinctive, and productive region. But the overlap and duplication of access to the city’s full spectrum of assets and attractions is limited.94
messages mean that the world has not yet learnt a compelling narrative
about what exactly Milan stands for or where it is going. Despite the presence of many multinational firms, Milan’s business brand
remains below its potential. Among some audiences, the city is still
Milan inherits a longstanding and resilient global reputation in key sectors, perceived as a warehouse and production city rather than a city of
especially fashion, design, and retail. The city is still Europe’s fourth most creativity and openness. Milan also does not yet possess a compelling
attractive for retailers, and Design Week and Fashion Week remain among identity for innovation or leadership as a city of the future although these
the most high-profile events on the global calendar, transmitting an image are now priorities. City Hall and the Milan Chamber of Commerce are
of Milan as a ‘fashion world city’.90 Milan’s 40-year reputation as a fashion promoting ‘Milan Smart City’, and the 2015 Expo showcased Milan’s
and design capital is not only a function of its industrial agglomeration or growing expertise in sustainability, food, and biotechnology.
of a quintessential Milanese style; it is also driven by the city’s powerful
association among expert buyers and consumers as a place where In principle, Milan should have the brand advantage of high visibility in
cutting-edge fashion is launched and sold. High-profile global prestigious sectors, a vibrant and varied consumer economy, and a rich
ambassadors also support Milan’s elite fashion status and provide the array of annual and one-off events. But this advantage has yet to be
city with free marketing.91 realised: Milan is only just starting to create a compelling story about its
role and contribution in the new world of cities.
17 | Milan’s Competitiveness

Recommendations

Communicating Milan’s competitiveness Italy and the Alpine region as an A smart city and region
increasingly integrated economic unit.
• Milan has yet to tell its story to the world • Milan has begun to make good progress
Doing so will provide Milan with the
– that of a region that has transformed on smart city applications, inter-operable
advantages of scale and visibility offered
itself from a centre of industry to a richly systems, the sharing economy, open
by leading global regions. In the longer
diverse post-industrial area. In particular, the innovation, urban services, and sustainable
term, Milan may need to secure
region’s breadth of assets and interlocking mobility. Because such elements are
nationwide support for its global role,
clusters can be communicated much more important to its alignment with future
including by encouraging development of
clearly. At this point in the cycle of recovery, thinking, Milan should move quickly to
an Italian ‘system of cities’ that can spread
it is important to agree on and promote an demonstrate how this transition to status as
to the rest of the country such benefits
agenda about the kind of city Milan wants a smart city may improve urban productivity
as supply chain development, business
to become over the next 20 years. and the ability to accommodate
expertise, and specialist talent.
entrepreneurship. Milan’s role as a
• The public/private Osservatorio Milano ‘lighthouse’ city within the EU Horizon
Making more use of soft power and soft
benchmarking collaboration is an important 2020 programme is a good example of
governance
step in measuring and monitoring Milan’s this potential.
comparative performance. More can be • Given the apparent obstacles to creating a
done to better document and communicate more streamlined and effective Partnership with Turin
Milan’s advantages, however. The city needs governance model in metropolitan Milan,
• Because they are the two largest cities
to continue expanding the data project in the city’s business leaders should prioritise
in northern Italy and have improved
order to tell a clearer and richer story ‘softer’ governance solutions – public/
connectivity and complementary strengths,
(including in English) to a variety of private partnerships, project preparation
there is a strong rationale for Milan and
international audiences about what the and delivery, and influence on and
Turin to expand their collaboration and
Milan region really is and why it offers example-setting for the government.
joint positioning while retaining their strong
unique opportunities. Examples of catalytic projects that may help
individual identities. Both cities would benefit
build a regional alliance include big land
from greater mutual understanding of the
Milan and Italy, Milan and the Alpine and real estate projects, university
networks of companies and the flows within
region partnerships, airport development,
and between them. This would inform the
co-operation between Milan and Turin,
• The economic gap between Milan and Italy kind of economic and R&D projects leaders
trans-Alpine trading initiatives, and joint
has grown dramatically in the past decade in the two cities could undertake and the
agendas such as creating smart cities and
and is set to continue growing over the segments in which the combined region
promoting urban innovation. Though
next decade. This presents two imperatives. could be promoted globally.
longer-term strategic planning may also
First, Milan must differentiate its business
have a positive impact, it will be more
environment and level of transparency
important as a soft governance tool to
from Italy’s less favourable business brand
identify strengths, weaknesses,
through a clear promotional and
opportunities, threats, and collaboration
awareness-raising effort. Second, Milan
priorities rather than a programme to be
must collaborate with other cities in the
pursued by a metropolitan authority.
region to pursue the emergence of northern
18 | Milan’s Competitiveness

Contributors

ULI would like to acknowledge the following people who assisted with the development of this report and the case studies by taking part
in research workshops and interviews.

Mario Abis Makno

Luigi Aiello Prelios
Angela Airoldi Makno
Davide Albertini Petroni Risanamento SpA
Prof Alessandro Balducci Politecnico di Milano
Alessandro Busci Prelios
Prof Mario Calderini Politecnico di Milano
Jacopo Della Fontana Studio D2U
Marco Dettori Assimpredil Ance
Prof Giovanna Fossa Politecnico di Milano
Renato Galliano Director of Urban Economics and Labour, City of Milan
Nicholas Garattini Generali Real Estate
Andrea Marani Studio GOP
Claudio Piccarreta JLL
Silvia Rovere Morgan Stanley SGR
Giancarlo Scotti President, ULI Italy
Domenico Siniscalco Morgan Stanley
Gianni Verga Engineer
Corrado Vismara Savills Larry Smith
Cristiana Zanzottera BNP Paribas
19 | Milan’s Competitiveness

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