Despite the growing financial losses, SMEs continue to pay salaries and support the Armed Forces of Ukraine

18/ 05/ 2023

Small and medium-sized businesses are increasingly feeling the negative impact of the economic consequences of Russian aggression. Over the past six months, SMEs have experienced significant losses due to the war. Only 6% of entrepreneurs have not suffered any damage so far, whereas, in October, 10% were operating without losses. These are the results of the quarterly survey conducted by the European Business Association among representatives of small and medium-sized businesses who are participants of the Unlimit Ukraine project. The percentage of SMEs estimating their business losses at a minimal amount of up to $10,000 has decreased from 33% in October 2022 to the current 24% in May. Among the surveyed, 26% reported losses ranging from $10,000 to $50,000, and 20% reported losses ranging from $50,000 to $100,000. Additionally, 18% reported losses exceeding $100,000. Moreover, 24% of the respondents incurred losses directly due to combat actions, and 7% had assets in the occupied territories. The decrease in the populations purchasing power is currently the most pressing issue for 57% of the surveyed entrepreneurs. For 31%, it is the lack of financing and access to credit, and 29% highlighted the fiscal pressure. Additionally, 28% complain about the shortage of skilled professionals and difficulties with employee booking and business travel abroad. Despite the difficulties, 41% of entrepreneurs are working at full capacity, 49% are conducting business with certain limitations, and 10% are not working. It is comparable to the situation six months ago. The top three restrictions implemented by companies remain unchanged - 34% have reduced their geographical scope of operations, 18% have transitioned to remote work, and 15% of respondents have closed some of their offices. The percentage of enterprises lacking sufficient financial reserves is increasing. It undermines the financial stability of small businesses. The number of SMEs without any reserves has grown from 25% in October to 32% in May. Meanwhile, the number of companies with financial reserves for one year or more has decreased from 14% to 12%. Currently, 4% of entrepreneurs have reserves for 1 months, and 31% for several months. Despite this, 62% of entrepreneurs maintain full wage payments to their employees. The number of companies reducing wages has slightly decreased from 18% to 16%. However, there has been an increase in the number of enterprises that have placed employees on unpaid leave, rising from 9% to 12%. Currently, 7% of SMEs are not paying wages, and 16% are laying off employees. In addition, companies continue to actively support the armed forces and provide humanitarian aid. Of the respondents, 47% provide financial assistance, 23% offer free services, 21% help with products, and 9% contribute with protective/defense equipment. Half of the surveyed SMEs have employees who have been mobilized into the ranks of the Armed Forces of Ukraine, with 22% of them being critical specialists for their operations. Specifically, 29% have mobilized up to 10% of their conscripted employees, 14% have mobilized 10-30%, and 5% have mobilized more than 30%. Among these companies, over a third support their employees who are defending the country. Ukrainian entrepreneurs stay in Ukraine (with only 4% relocating abroad) while actively seeking ways to expand the geographical reach of their businesses. Currently, 19% of the surveyed SMEs are already exporting their products abroad, while 14% are establishing contacts, negotiating, or obtaining necessary permits. A third of the respondents mentioned facing difficulties in accessing international markets. Despite challenging working conditions, government support programs still do not enjoy widespread popularity among SME representatives. For example, 24% of entrepreneurs lack information about government and international support programs. At the same time, entrepreneurs have actively utilized tax incentives (38% of respondents) and the Affordable Loans 5-7-9% program (28%). However, opinions on tax incentives were mainly positive, with 64% of entrepreneurs evaluating them positively. On the other hand, views on the Affordable Loans 5-7-9% program were divided - among those who applied for the program, nearly half, especially 48%, had a negative experience. Entrepreneurs complained about difficulties obtaining the loan, high initial contributions, unexplained rejections, and the programs limited coverage of many business categories. Anna Derevyanko. EBA Executive Director. The latest wave of our survey demonstrates that the situation with financial reserves and the volume of losses incurred by small businesses has become more challenging over the past six months. At the same time, entrepreneurs are not specifically inclined to use government support programs or have had negative experiences with them. It is precisely in this area that we, together with the government, need to work soon, to take into account the feedback from the real sector and improve the accessibility of these programs. As the russian aggression continues, it becomes increasingly difficult for vulnerable small businesses. We are ready to provide regular feedback to the government on this matter and support small businesses within the framework of the Unlimit Ukraine project. For reference: The survey was conducted from April 24 to May 11 among individual entrepreneurs who are participants in Unlimit Ukraine, a project of the European Business Association to support small and medium-sized businesses. Thus, 90 entrepreneurs took part in the survey.

These are the results of the quarterly survey conducted by the European Business Association among representatives of small and medium-sized businesses who are participants of the Unlimit Ukraine project.

The percentage of SMEs estimating their business losses at a minimal amount of up to $10,000 has decreased from 33% in October 2022 to the current 24% in May. Among the surveyed, 26% reported losses ranging from $10,000 to $50,000, and 20% reported losses ranging from $50,000 to $100,000. Additionally, 18% reported losses exceeding $100,000. Moreover, 24% of the respondents incurred losses directly due to combat actions, and 7% had assets in the occupied territories.

The decrease in the population’s purchasing power is currently the most pressing issue for 57% of the surveyed entrepreneurs. For 31%, it is the lack of financing and access to credit, and 29% highlighted the fiscal pressure. Additionally, 28% complain about the shortage of skilled professionals and difficulties with employee booking and business travel abroad.

Despite the difficulties, 41% of entrepreneurs are working at full capacity, 49% are conducting business with certain limitations, and 10% are not working. It is comparable to the situation six months ago. The top three restrictions implemented by companies remain unchanged – 34% have reduced their geographical scope of operations, 18% have transitioned to remote work, and 15% of respondents have closed some of their offices.

The percentage of enterprises lacking sufficient financial reserves is increasing. It undermines the financial stability of small businesses. The number of SMEs without any reserves has grown from 25% in October to 32% in May. Meanwhile, the number of companies with financial reserves for one year or more has decreased from 14% to 12%. Currently, 4% of entrepreneurs have reserves for 1 months, and 31% for several months.

Despite this, 62% of entrepreneurs maintain full wage payments to their employees. The number of companies reducing wages has slightly decreased from 18% to 16%. However, there has been an increase in the number of enterprises that have placed employees on unpaid leave, rising from 9% to 12%. Currently, 7% of SMEs are not paying wages, and 16% are laying off employees.

In addition, companies continue to actively support the armed forces and provide humanitarian aid. Of the respondents, 47% provide financial assistance, 23% offer free services, 21% help with products, and 9% contribute with protective/defense equipment.

Half of the surveyed SMEs have employees who have been mobilized into the ranks of the Armed Forces of Ukraine, with 22% of them being critical specialists for their operations. Specifically, 29% have mobilized up to 10% of their conscripted employees, 14% have mobilized 10-30%, and 5% have mobilized more than 30%. Among these companies, over a third support their employees who are defending the country.

Ukrainian entrepreneurs stay in Ukraine (with only 4% relocating abroad) while actively seeking ways to expand the geographical reach of their businesses. Currently, 19% of the surveyed SMEs are already exporting their products abroad, while 14% are establishing contacts, negotiating, or obtaining necessary permits. A third of the respondents mentioned facing difficulties in accessing international markets.

Despite challenging working conditions, government support programs still do not enjoy widespread popularity among SME representatives. For example, 24% of entrepreneurs lack information about government and international support programs. At the same time, entrepreneurs have actively utilized tax incentives (38% of respondents) and the “Affordable Loans 5-7-9%” program (28%). However, opinions on tax incentives were mainly positive, with 64% of entrepreneurs evaluating them positively. On the other hand, views on the “Affordable Loans 5-7-9%” program were divided – among those who applied for the program, nearly half, especially 48%, had a negative experience. Entrepreneurs complained about difficulties obtaining the loan, high initial contributions, unexplained rejections, and the program’s limited coverage of many business categories.

Anna Derevyanko EBA Executive Director

The latest wave of our survey demonstrates that the situation with financial reserves and the volume of losses incurred by small businesses has become more challenging over the past six months. At the same time, entrepreneurs are not specifically inclined to use government support programs or have had negative experiences with them. It is precisely in this area that we, together with the government, need to work soon, to take into account the feedback from the real sector and improve the accessibility of these programs. As the russian aggression continues, it becomes increasingly difficult for vulnerable small businesses. We are ready to provide regular feedback to the government on this matter and support small businesses within the framework of the Unlimit Ukraine project.

For reference:

The survey was conducted from April 24 to May 11 among individual entrepreneurs who are participants in Unlimit Ukraine, a project of the European Business Association to support small and medium-sized businesses. Thus, 90 entrepreneurs took part in the survey.