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Small business sentiment is improving

28/ 02/ 2020

The results of the Small Business Attitudes Index, conducted for the third year in a row by the European Business Association within the Unlimit Ukraine project, showed an increase in optimistic views among Ukrainian entrepreneurs. Thus, the index reached 3 points out of 5 possible, compared to 2.7 points last year, and finally came out of the negative plane.

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In general, it can be seen as a positive trend, compared to the results of previous years. The number of satisfied with the current state of business has increased significantly – from last year’s 31.6% to the current 42%. In addition, the number of those who are not satisfied with the current economic situation decreased – 29.2% against 38.4% last year.

The number of entrepreneurs who expect an improvement in the business situation has increased by 10% compared to last year – 58.7% against 47.4%. Almost half of the entrepreneurs plan to increase the number of employees – 40.8% plan to hire new people, and only 9.6% plan to cut. In addition, 44.6% plan to increase the salary for their workers. Over the past year, entrepreneurs’ satisfaction with their level of profits has increased dramatically – almost one and a half times. Last year, only 27% of respondents were satisfied with their income, and now there are 40.7% of them. However, it should be noted that the vast majority (59.3%) would still like to earn more.

At the same time, according to 69.1% of respondents, the economic situation is still unfavorable for doing business. Although the number of dissatisfied decreased by 3% ( it was 72.2% in 2018), the number of entrepreneurs skeptical of the country’s economic environment remains quite large. Thus, the biggest obstacles to the business were the tax burden (49.6%) and the high level of corruption (46%). It should be noted that dissatisfaction with these two factors decreased compared to 2018 (56.4% and 51.9% respectively). Besides, entrepreneurs have become less concerned about inflation issues, shortage of qualified personnel and the War in the East. However, concerns about the complexity of tax administration and pressure from judicial and regulatory authorities have increased.

Due to the violation of tax regulation, 35.1% of entrepreneurs were fined in the last 3 years. Most (33.1%) were simply late in paying their taxes, and 10.8% made mistakes in reporting. However, the reason for this situation, according to respondents, is often the lack of clarity in procedures and the lack of knowledge of entrepreneurs in taxation changes. In addition, almost 10% of the respondents complained about the irregularity of the control bodies’ decisions during tax audits.

Olga Taranova
Over a third of entrepreneurs have been paying fines in the last 3 years. Most of them have been paying due to inaccuracies in tax legislation, lack of clarification, the bureaucratization of processes, or technical issues. Behind most of the fines stand not violators, but young entrepreneurs focused on developing their businesses, who do not want to understand the legal requirements and remember the dates of payment of taxes. We support the Small Business Attitudes Index to identify gaps where we can help. I am sure that most of the current problems will disappear with the advent of smart technological solutions offered by the Ukrainian IT market.

It is not surprising that, if entrepreneurs had the opportunity to change one factor affecting the country’s economy for the benefit of their businesses, most of them (29.8%) would have changed tax legislation. Priorities in this area would be to simplify tax procedures and reduce tax rates. The idea of deregulation was endorsed by 8.5% of those polled who want to simplify the conditions for doing business and developing digital technologies in the public services sector.

Anna Derevyanko Executive Director of the European Business Association
We are pleased that every year more and more small and medium-sized business owners join the survey. It is good to see that positive sentiment prevails among business representatives. Despite the improvements, small businesses are still complaining about problems related to government regulation. Of course, trust between the state and business cannot be built at one time, it can only be done by building on a long-term positive experience in relations between the two parties. And we are pleased to promote such a dialogue at the Association.

SMALL BUSINESS ATTITUDES INDEX – conducted by the European Business Association since 2018 within the Unlimit Ukraine project. Project partners this year: LIGA:ZAKON, 28Quadrate, Ministry of Digital Transformation. The purpose of the study is to collaborate with small and microbusinesses and to analyze growth points that will stimulate its development. The survey was conducted from October 29 to December 18, 2019. 632 small business owners and directors of all fields of activity joined the survey.

Unlimit Ukraine is a small business and microbusiness development platform created on the basis of the European Business Association. The project provides comprehensive support for small and microbusiness through educational events and consultations, participation in special projects, diagnostics of business problems and discussion of issues relevant to it. The participants of the project can be small and micro-businesses with the ownership of FOP without limitation of activities. Today, Unlimit Ukraine includes 1550 SMEs.

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