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Small business sentiment has significantly deteriorated

24/ 02/ 2021
  According to this year’s Small Business Attitudes Index, there is a significant deterioration in the sentiment of small businesses in Ukraine. This study was conducted within the Unlimit Ukraine by the European Business Association in partnership with Mind.ua. Thus, the Index fell to 2.38 points out of 5 possible, compared to 3.07 points last year, and returned to the negative plane. These results are the lowest in the history of the study of the Small Business Attitudes Index since 2017.  View the presentation Compared to previous years, the number of entrepreneurs satisfied with the state of affairs in their business has almost halved – the current 24% against 42% last year. Accordingly, the number of dissatisfied has increased – from last years 29% to the current 58%. Not only the sentiments but also the expectations for the better deteriorated in 2020. For the first time in four years, expectations are assessed only at 10% higher than the current state of affairs. Only 27% of respondents expect the business situation to improve over the next 6 months, compared to 59% last year. On the contrary, 52% of entrepreneurs expect deterioration. About half of the respondents do not plan to change the companys HR policy next year, both in terms of the number of employees and salaries. Although there are 18% who plan to increase the number of employees, and 23% – to increase salaries. Survey participants gave the worst points to the economic situation in the country compared to other components of the Index. Thus, 80% consider the current economic situation unfavorable for doing business. The main reasons for this are the low purchasing power of the population, the impact of quarantine restrictions, the tax burden, and fiscal pressure. It is worth noting that the tax burden which traditionally tops this anti-rating, is now in third place. However, the tax sphere remains one of the top areas that need change for the better according to small businesses. Thus, 31% say about the need for progressive changes in the field of taxation, while another 9% report the need for deregulation and increased efficiency of all government branches. Affordable loans and credits are a traditionally relevant topic for small businesses. According to the survey, every fifth entrepreneur plans to attract loans to develop their business in 2021. At the same time, the vast majority, namely 64% of respondents believe that getting a loan in Ukraine is difficult or impossible. Last year, such pessimistic views were held by slightly fewer entrepreneurs - 52%. We also asked entrepreneurs what the main pandemic-induced consequences are for their businesses. The majority, namely 58%, noted a decrease in the number of orders, another 18% were forced to revise the business model and look for new directions, 10% optimized activities and reduced staff, and 3% were able to increase sales or open new markets. And only 14% did not notice the effect of coronavirus on their activities. Anna Derevyanko. EBA Executive Director. 2020 has become a real test for business, especially for small ones. Interestingly, both large and small companies have a similar assessment of the current conditions of doing business - 2.38 points out of 5. However, the situation differs for them. Thus, SMEs do not yet have a sufficient margin of safety, compared to large players. Therefore, small business today needs increased support from everywhere - from the state, media, society, big business. Therefore, as the largest business association in the country, we consider it our duty to help SMEs in the framework of the Unlimit Ukraine project. Last year, together with the Ukrainian Startup Fund, we launched another project in which small businesses can work with large ones, for example, in developing automation programs and other solutions that are needed by large companies. So, I invite you not to miss this opportunity and join the initiative,” says Anna Derevyanko, EBA Executive Director. Olena Ayrault. Manager Unlimit Ukraine Project. For another year, the business finds it most troublesome to gain access to cheap and affordable loans. Despite the state′s efforts in this direction and the launch of the 5-7-9% program, the percentage of small entrepreneurs who find it difficult to get a loan is only growing. Small business feedback should be considered to improve program conditions and create easier and faster access to credit. Besides, it is very important that government support is not limited to simplifying access to funds, but instead provides comprehensive solutions for the development and scaling of small businesses. Yevhen Shpytko. Founder and Editor-in-chief of Mind.ua. The consequences of the pandemic for small and medium-sized businesses are so far-reaching that they have completely shifted the accents, overshadowing national problems. Now the business does not perceive corruption and war as the ′starting points′ of all problems, but their derivatives - the inadequacy of government action and low purchasing power. Valeriya Ionan. Deputy Minister of Digital Transformation of Ukraine. COVID-19 has hit small and medium-sized businesses hard. Therefore, the Ministry of Digital Transformation pays special attention to creating comfortable conditions for doing business - without bureaucracy, queues, and corruption. We have launched the fastest business registration in the world. And within the framework of the national project Diia.Business, we implement many initiatives aimed at business development and encouraging young people to do business. For example, every entrepreneur can use free online consultations, of which there are a total of 55 types available in 12 different fields. We also launched free courses at the National Online School for Entrepreneurs. Besides, together with partners, we have introduced the discipline Innovative Entrepreneurship and Startup Project Management in 76 universities in Ukraine. And we will be sure to use analytics and research recommendations when developing government support programs for small and medium-sized businesses, as well as building an ecosystem to support entrepreneurship. In particular, this year we plan to open from 7 to 14 offline Diia.Business support centers for entrepreneurs throughout Ukraine. We also plan to launch the first state agency for the development of entrepreneurship and exports, said Valeriya Ionan, Deputy Minister of Digital Transformation of Ukraine. Andriy Slabinskiy. Director at SME Development Office (SMEDO). Product sales problems and the need to invent new digital ways of organizing work have become characteristic markers of the past year. The COVID-19 pandemic and restrictive quarantine measures have become both a source of these problems and a catalyst for change and development. Given this, access to finance, especially outside the agricultural sector, has become more difficult, as shown by the Index. The state program 5-7-9 is adapted to the needs of business in working capital and refinancing, and it has made a significant contribution to ensure that Ukrainian business goes through the pandemic with minimal losses. However, most micro and small businesses will continue to need alternative financing sources other than bank loans. Thats why the SME Development Office, in close cooperation with our partners, focuses on the development of not yet common ways of financing such as factoring, modern offline and online business support infrastructure, as well as training and consulting support programs. https://youtu.be/UbJNAJd9psQ   SMALL BUSINESS ATTITUDES INDEX – conducted by the European Business Association since 2017 within the Unlimit Ukraine project. Project partner this year: Mind.ua. The purpose of the study is to collaborate with small and microbusinesses and to analyze growth points that will stimulate their development. The survey was conducted from December 1 to 31, 2020. Altogether, 426 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 2400 SMEs. Mind.ua is an independent business media portal aimed at creating a quality product that is useful to the readers. Mind professes knowledge journalism which means telling, explaining, and providing the reader with the opportunity to make conscious choices in various spheres of life - economic, cultural, social, and entrepreneurial ones.   Be the first to learn about the latest EBA news with our Telegram-channel – EBAUkraine.

According to this year’s Small Business Attitudes Index, there is a significant deterioration in the sentiment of small businesses in Ukraine. This study was conducted within the Unlimit Ukraine by the European Business Association in partnership with Mind.ua. Thus, the Index fell to 2.38 points out of 5 possible, compared to 3.07 points last year, and returned to the negative plane. These results are the lowest in the history of the study of the Small Business Attitudes Index since 2017. 

View the presentation

Compared to previous years, the number of entrepreneurs satisfied with the state of affairs in their business has almost halved – the current 24% against 42% last year. Accordingly, the number of dissatisfied has increased – from last year’s 29% to the current 58%.

Not only the sentiments but also the expectations for the better deteriorated in 2020. For the first time in four years, expectations are assessed only at 10% higher than the current state of affairs. Only 27% of respondents expect the business situation to improve over the next 6 months, compared to 59% last year. On the contrary, 52% of entrepreneurs expect deterioration.

About half of the respondents do not plan to change the company’s HR policy next year, both in terms of the number of employees and salaries. Although there are 18% who plan to increase the number of employees, and 23% – to increase salaries.

Survey participants gave the worst points to the economic situation in the country compared to other components of the Index. Thus, 80% consider the current economic situation unfavorable for doing business. The main reasons for this are the low purchasing power of the population, the impact of quarantine restrictions, the tax burden, and fiscal pressure. It is worth noting that the tax burden which traditionally tops this anti-rating, is now in third place.

However, the tax sphere remains one of the top areas that need change for the better according to small businesses. Thus, 31% say about the need for progressive changes in the field of taxation, while another 9% report the need for deregulation and increased efficiency of all government branches.

Affordable loans and credits are a traditionally relevant topic for small businesses. According to the survey, every fifth entrepreneur plans to attract loans to develop their business in 2021. At the same time, the vast majority, namely 64% of respondents believe that getting a loan in Ukraine is difficult or impossible. Last year, such pessimistic views were held by slightly fewer entrepreneurs – 52%.

We also asked entrepreneurs what the main pandemic-induced consequences are for their businesses. The majority, namely 58%, noted a decrease in the number of orders, another 18% were forced to revise the business model and look for new directions, 10% optimized activities and reduced staff, and 3% were able to increase sales or open new markets. And only 14% did not notice the effect of coronavirus on their activities.

Anna Derevyanko EBA Executive Director
2020 has become a real test for business, especially for small ones. Interestingly, both large and small companies have a similar assessment of the current conditions of doing business - 2.38 points out of 5. However, the situation differs for them. Thus, SMEs do not yet have a sufficient margin of safety, compared to large players. Therefore, small business today needs increased support from everywhere - from the state, media, society, big business.

“Therefore, as the largest business association in the country, we consider it our duty to help SMEs in the framework of the Unlimit Ukraine project. Last year, together with the Ukrainian Startup Fund, we launched another project in which small businesses can work with large ones, for example, in developing automation programs and other solutions that are needed by large companies. So, I invite you not to miss this opportunity and join the initiative,” says Anna Derevyanko, EBA Executive Director.

Olena Ayrault Manager Unlimit Ukraine Project
For another year, the business finds it most troublesome to gain access to cheap and affordable loans. Despite the state′s efforts in this direction and the launch of the "5-7-9%" program, the percentage of small entrepreneurs who find it difficult to get a loan is only growing. Small business feedback should be considered to improve program conditions and create easier and faster access to credit. Besides, it is very important that government support is not limited to simplifying access to funds, but instead provides comprehensive solutions for the development and scaling of small businesses.
Yevhen Shpytko Founder and Editor-in-chief of Mind.ua
The consequences of the pandemic for small and medium-sized businesses are so far-reaching that they have completely shifted the accents, overshadowing national problems. Now the business does not perceive corruption and war as the ′starting points′ of all problems, but their derivatives - the inadequacy of government action and low purchasing power.
Valeriya Ionan Deputy Minister of Digital Transformation of Ukraine
COVID-19 has hit small and medium-sized businesses hard. Therefore, the Ministry of Digital Transformation pays special attention to creating comfortable conditions for doing business - without bureaucracy, queues, and corruption. We have launched the fastest business registration in the world. And within the framework of the national project Diia.Business, we implement many initiatives aimed at business development and encouraging young people to do business. For example, every entrepreneur can use free online consultations, of which there are a total of 55 types available in 12 different fields. We also launched free courses at the National Online School for Entrepreneurs.

“Besides, together with partners, we have introduced the discipline “Innovative Entrepreneurship and Startup Project Management” in 76 universities in Ukraine. And we will be sure to use analytics and research recommendations when developing government support programs for small and medium-sized businesses, as well as building an ecosystem to support entrepreneurship. In particular, this year we plan to open from 7 to 14 offline Diia.Business support centers for entrepreneurs throughout Ukraine. We also plan to launch the first state agency for the development of entrepreneurship and exports, “said Valeriya Ionan, Deputy Minister of Digital Transformation of Ukraine.

Andriy Slabinskiy Director at SME Development Office (SMEDO)
Product sales problems and the need to invent new digital ways of organizing work have become characteristic markers of the past year. The COVID-19 pandemic and restrictive quarantine measures have become both a source of these problems and a catalyst for change and development. Given this, access to finance, especially outside the agricultural sector, has become more difficult, as shown by the Index.

“The state program “5-7-9″ is adapted to the needs of business in working capital and refinancing, and it has made a significant contribution to ensure that Ukrainian business goes through the pandemic with minimal losses. However, most micro and small businesses will continue to need alternative financing sources other than bank loans. That’s why the SME Development Office, in close cooperation with our partners, focuses on the development of not yet common ways of financing such as factoring, modern offline and online business support infrastructure, as well as training and consulting support programs.”

 

SMALL BUSINESS ATTITUDES INDEX – conducted by the European Business Association since 2017 within the Unlimit Ukraine project. Project partner this year: Mind.ua. The purpose of the study is to collaborate with small and microbusinesses and to analyze growth points that will stimulate their development. The survey was conducted from December 1 to 31, 2020. Altogether, 426 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 2400 SMEs.

Mind.ua is an independent business media portal aimed at creating a quality product that is useful to the readers. Mind professes “knowledge journalism” which means telling, explaining, and providing the reader with the opportunity to make conscious choices in various spheres of life – economic, cultural, social, and entrepreneurial ones.

 

Be the first to learn about the latest EBA news with our Telegram-channel EBAUkraine.

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