Two-Thirds of Kharkiv Entrepreneurs Report Losses Between $1 and $10 Million

10/ 08/ 2024

For the third consecutive year, entrepreneurs in the Kharkiv region have rated the business conditions as the worst among all the regional offices of the European Business Association. This outcome is understandable, given the constant shelling, proximity to the frontlines, and the new offensive in the Kharkiv region this year. The overall assessment of business conditions for 2024 stands at 1.45 points on a 5-point scale. Most companies believe that the business environment in the region has deteriorated over the past year. Last year, this indicator was 1.62 points, and in 2022, it was 1.28 points. In 2024, all surveyed companies rate business conditions as difficult, with 55% considering them very difficult. This year, no company rated the business environment as satisfactory, whereas last year, 6% did. Currently, none of the surveyed companies are operating at full capacity, whereas last year, 6% were fully operational. Now, 91% of companies are operating with limitations, and 9% are not operating at all. Only 18% of the surveyed enterprises have relocated within Ukraine or abroad. Overall, 55% cite the lack of such an opportunity, and 27% mention the absence of a need to relocate. The main challenges in the region for companies include power shortages, as well as mobilization and difficulties in reserving employees. All surveyed companies have employees serving in the Armed Forces of Ukraine. Specifically, in 36% of companies, these employees make up to 10% of all eligible personnel, in 45%, it’s 10-20%, and in 18%, it’s 20-30%. Additionally, 36% of respondents are experiencing an increase in raiding attempts. Among the positive factors, businesses mention exemption from local taxes. Unlike other regions, entrepreneurs in the Kharkiv region are focused on cost-cutting and creating opportunities for remote work for their employees to ensure stable operations under martial law. To support their activities, 18% of respondents have secured grants, and 9% have used the Affordable Loans 5-7-9% program. Measures to preserve and restore infrastructure, ensure transparency in legislation and consistent rules of the game, reduce the burden on payroll funds, and implement a clear and effective employee reservation procedure could support companies during this time. In this context, 82% of respondents support the introduction of economic reservation. In assessing the cooperation between businesses and local authorities, companies gave the highest ratings to the work of the National Police and regional customs. At the same time, entrepreneurs believe that interactions with the Territorial Recruitment and Social Support Centers and the judicial system need improvement. The scale of business losses continues to grow each year. Over the 2.5 years of full-scale war, 36% of surveyed entrepreneurs in the Kharkiv office of the Association have lost up to $1 million, while the other 64% have lost between $1 million and $10 million. Last year, the majority of respondents (63%) reported losses of no more than $1 million. Business forecasts in the Kharkiv region regarding the duration of the war remain very cautious. More than half, or 55%, believe the war could end within the next three years, 27% believe it will end in 2025, and 9% expect the war to last much longer. Despite this, entrepreneurs have a vision for the post-war reconstruction of the region. According to businesses, this will be facilitated by infrastructure restoration, creating conditions for people to return, long-term business support programs, including grants, special tax conditions, transparent dialogue with authorities, and a favorable investment environment. For reference: The survey was conducted among regional offices of the European Business Association, specifically among member companies of the Kharkiv office, from July 10 to 24, 2024. The full report is available via this link.

The overall assessment of business conditions for 2024 stands at 1.45 points on a 5-point scale. Most companies believe that the business environment in the region has deteriorated over the past year. Last year, this indicator was 1.62 points, and in 2022, it was 1.28 points.

In 2024, all surveyed companies rate business conditions as difficult, with 55% considering them very difficult. This year, no company rated the business environment as satisfactory, whereas last year, 6% did.

Currently, none of the surveyed companies are operating at full capacity, whereas last year, 6% were fully operational. Now, 91% of companies are operating with limitations, and 9% are not operating at all. Only 18% of the surveyed enterprises have relocated within Ukraine or abroad. Overall, 55% cite the lack of such an opportunity, and 27% mention the absence of a need to relocate.

The main challenges in the region for companies include power shortages, as well as mobilization and difficulties in reserving employees. All surveyed companies have employees serving in the Armed Forces of Ukraine. Specifically, in 36% of companies, these employees make up to 10% of all eligible personnel, in 45%, it’s 10-20%, and in 18%, it’s 20-30%. Additionally, 36% of respondents are experiencing an increase in raiding attempts. Among the positive factors, businesses mention exemption from local taxes.

Unlike other regions, entrepreneurs in the Kharkiv region are focused on cost-cutting and creating opportunities for remote work for their employees to ensure stable operations under martial law. To support their activities, 18% of respondents have secured grants, and 9% have used the “Affordable Loans 5-7-9%” program.

Measures to preserve and restore infrastructure, ensure transparency in legislation and consistent “rules of the game,” reduce the burden on payroll funds, and implement a clear and effective employee reservation procedure could support companies during this time. In this context, 82% of respondents support the introduction of economic reservation.

In assessing the cooperation between businesses and local authorities, companies gave the highest ratings to the work of the National Police and regional customs. At the same time, entrepreneurs believe that interactions with the Territorial Recruitment and Social Support Centers and the judicial system need improvement.

The scale of business losses continues to grow each year. Over the 2.5 years of full-scale war, 36% of surveyed entrepreneurs in the Kharkiv office of the Association have lost up to $1 million, while the other 64% have lost between $1 million and $10 million. Last year, the majority of respondents (63%) reported losses of no more than $1 million.

Business forecasts in the Kharkiv region regarding the duration of the war remain very cautious. More than half, or 55%, believe the war could end within the next three years, 27% believe it will end in 2025, and 9% expect the war to last much longer.

Despite this, entrepreneurs have a vision for the post-war reconstruction of the region. According to businesses, this will be facilitated by infrastructure restoration, creating conditions for people to return, long-term business support programs, including grants, special tax conditions, transparent dialogue with authorities, and a favorable investment environment.

For reference:

The survey was conducted among regional offices of the European Business Association, specifically among member companies of the Kharkiv office, from July 10 to 24, 2024. The full report is available via this link.