Mobilization, Labor Shortage, Employee Reservation — Key Challenges for Businesses in the Western Region

10/ 08/ 2024

For the fifth consecutive year, entrepreneurs in the Western region have rated the business climate the highest among the regional offices of the European Business Association. Overall, the current business environment was rated 2.62 out of 5, nearly identical to last years score of 2.64. However, two-thirds of respondents feel that business conditions have deteriorated. Currently, slightly more than half of respondents—53%—consider the conditions satisfactory, down from 72% last year. Moreover, the number of those finding it difficult to operate has increased from 28% in 2023 to 41% currently. Another 6% report that it is easy to do business. Meanwhile, 56% of companies in the region are operating at full capacity, while 44% are working with some limitations. Last year, 76% of surveyed companies were fully operational. The main challenges for companies in the Western Ukrainian office of the Association relate to human capital—mobilization, difficulties in reserving employees, and labor shortages. A total of 85% of companies have employees serving in the Armed Forces of Ukraine, with 31% of companies reporting that up to 10% of their eligible workforce is in the military, 38% reporting 10-20%, and 16% reporting 20-30% of employees. Among the positive factors affecting business, companies mention the relative safety of the region, convenient geographical and logistical location, moderate climate, established dialogue with local authorities, and the relocation of businesses and people from other regions. According to entrepreneurs, improving business conditions would require ensuring an effective and transparent reservation procedure, further digitalization of interactions with government agencies, and ensuring transparency in legislation and consistent rules of the game. Among the surveyed companies, 78% support the introduction of economic reservation for employees. Companies continue to suffer losses due to the war. Among the companies we surveyed, 53% reported losses of up to $1 million, 25% reported losses in the range of $1-10 million, and 3% reported losses of more than $10 million. At the same time, 9% have secured grant funding for their needs. When evaluating the activities of local authorities, entrepreneurs gave the highest marks to the work of the Regional Military Administration and the city council (Lviv). At the same time, given the conditions of martial law, businesses see a need for improved interaction with the Territorial Recruitment and Social Support Centers and the judiciary. Companies remain focused on the same tasks as last year—maintaining operations under martial law, digitalizing business processes, and expanding their businesses. Only 13% of respondents believe the war will end by the end of 2024, while 28% expect it to end in 2025, and another 19% anticipate it will take place within the next three years. According to the surveyed companies, the post-war reconstruction of the region should be based on the rule of law and the fight against corruption, strengthening defense capabilities, localization of production, restoration and diversification of infrastructure, particularly energy, creating conditions for the return of migrants, and attracting investors. For reference: The survey was conducted among member companies of the Western Ukrainian office of the European Business Association from July 4 to 23, 2024. The full report is available via this link.

However, two-thirds of respondents feel that business conditions have deteriorated. Currently, slightly more than half of respondents—53%—consider the conditions satisfactory, down from 72% last year. Moreover, the number of those finding it difficult to operate has increased from 28% in 2023 to 41% currently. Another 6% report that it is easy to do business.

Meanwhile, 56% of companies in the region are operating at full capacity, while 44% are working with some limitations. Last year, 76% of surveyed companies were fully operational.

The main challenges for companies in the Western Ukrainian office of the Association relate to human capital—mobilization, difficulties in reserving employees, and labor shortages. A total of 85% of companies have employees serving in the Armed Forces of Ukraine, with 31% of companies reporting that up to 10% of their eligible workforce is in the military, 38% reporting 10-20%, and 16% reporting 20-30% of employees.

Among the positive factors affecting business, companies mention the relative safety of the region, convenient geographical and logistical location, moderate climate, established dialogue with local authorities, and the relocation of businesses and people from other regions.

According to entrepreneurs, improving business conditions would require ensuring an effective and transparent reservation procedure, further digitalization of interactions with government agencies, and ensuring transparency in legislation and consistent “rules of the game.” Among the surveyed companies, 78% support the introduction of economic reservation for employees.

Companies continue to suffer losses due to the war. Among the companies we surveyed, 53% reported losses of up to $1 million, 25% reported losses in the range of $1-10 million, and 3% reported losses of more than $10 million. At the same time, 9% have secured grant funding for their needs.

When evaluating the activities of local authorities, entrepreneurs gave the highest marks to the work of the Regional Military Administration and the city council (Lviv). At the same time, given the conditions of martial law, businesses see a need for improved interaction with the Territorial Recruitment and Social Support Centers and the judiciary.

Companies remain focused on the same tasks as last year—maintaining operations under martial law, digitalizing business processes, and expanding their businesses.

Only 13% of respondents believe the war will end by the end of 2024, while 28% expect it to end in 2025, and another 19% anticipate it will take place within the next three years. According to the surveyed companies, the post-war reconstruction of the region should be based on the rule of law and the fight against corruption, strengthening defense capabilities, localization of production, restoration and diversification of infrastructure, particularly energy, creating conditions for the return of migrants, and attracting investors.

For reference:

The survey was conducted among member companies of the Western Ukrainian office of the European Business Association from July 4 to 23, 2024. The full report is available via this link.