Support for operations, digitalization, and new markets are the focus of regional businesses

09/ 08/ 2024

The European Business Association focuses particularly on the state of local businesses and the activities of entrepreneurs on the ground. Every Ukrainian region, regardless of its proximity to the front line, faces unique challenges and issues today. To assess current business conditions, the impact of the war on entrepreneurial sentiment, and to understand the plans and challenges companies face, the EBA has been conducting a business survey for the fifth consecutive year in four regions where its offices are located—Lviv, Odesa, Kharkiv, and Dnipro. Compared to last year, the business climate ratings in Lviv (2.62 points) and Dnipro (2.20 points) have remained nearly unchanged. Meanwhile, the ratings in Odesa (2.15 points) and Kharkiv (1.45 points) have slightly worsened. Companies generally rate the business environment as challenging, with only the Western region having a majority of companies that consider the conditions satisfactory. Common challenges across most regions include issues related to mobilization, difficulties in obtaining work exemptions, staff shortages, and power supply deficits. Beyond maintaining operations under martial law, most businesses plan to focus on digitalizing their processes, entering new markets, and expanding their operations. Additionally, entrepreneurs in the Kharkiv region plan to cut costs and organize remote work. Let’s take a closer look at the situation in each region. Lviv For several years now, the highest business climate ratings have consistently come from entrepreneurs in the Western region. However, compared to last year, the number of businesses in Lviv that find it difficult to operate has increased from 28% to 41%. At the same time, 53% consider the business environment satisfactory (down from 72% last year), and 6% say it is easy to conduct business at the moment. Currently, 56% of companies in the region are fully operational, while 44% operate with some limitations. The main obstacles to doing business in the Western region include issues related to human capital—mobilization, difficulties in obtaining work exemptions for employees, and staff shortages. Eighty-five percent of companies have employees serving in the Armed Forces of Ukraine, with 69% reporting that up to 20% of their eligible workers are currently mobilized, and 16% indicating that 20-30% of their workforce is in the military. 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 entrepreneurs believe the war may end by the end of 2024, while 28% expect it to conclude in 2025, and another 19% think it will end within the next three years. Dnipro This year, the Dnipropetrovsk region ranks second in terms of business climate, with a situation very similar to last years. Seventy-five percent of entrepreneurs describe the working conditions in the region as difficult, while the remaining 25% find them satisfactory. Currently, only 20% of companies in the region are fully operational, with the other 80% operating with some limitations. Key challenges in the region include issues related to mobilization and difficulties in obtaining work exemptions for employees. Additionally, as an industrial region, power outages significantly impact business operations. Currently, 60% of companies report that up to 20% of their employees are serving in the Armed Forces, 25% report 20-30%, and 5% report 30-40%. Overall, volunteers or mobilized workers are present in 90% of the surveyed companies in the region. For the second year in a row, beyond maintaining operations under martial law, companies are focusing on digitalizing business processes and entering new markets. Thirty-five percent of respondents believe the war will end in 2025, while 25% think it will end within one to three years, and 15% expect Ukraine to remain in a state of war for a prolonged period. Odesa In the Odesa region, the number of entrepreneurs who consider the business environment difficult has increased from 53% last year to 75% this year. Meanwhile, 20% find the conditions satisfactory, and 5% find them easy. Forty percent of companies in the region are fully operational, while 60% operate with some limitations. The key challenges for companies in the Southern region include similar factors to those in the Western region—difficulties in obtaining work exemptions for employees, mobilization, and staff shortages. Eighty percent of companies have employees serving in the Armed Forces, with 65% reporting that up to 20% of their eligible workers are currently mobilized, and 15% reporting more than 20%. Despite the challenges, businesses are focusing on digitalizing their processes and entering new markets, in addition to maintaining their current operations. Twenty percent of the entrepreneurs we surveyed believe the war will end by the end of the year, while 25% think it will end in 2025, and another 25% expect it to conclude within the next three years. Kharkiv As expected, the business climate ratings from entrepreneurs in the Kharkiv region are the lowest. All surveyed companies rated the conditions as difficult, with 55% describing them as very difficult. This year, no company rated the business environment as satisfactory, compared to 6% last year. Currently, none of the surveyed companies are fully operational (6% were fully operational last year). Meanwhile, 91% are operating with limitations, and 9% are not operating at all. The main challenges in the region include power supply deficits, as well as mobilization and difficulties in obtaining work exemptions for employees. Among the companies we surveyed, all have employees serving in the Armed Forces—81% report that up to 20% of their eligible workers are mobilized, and 18% report 20-30%. Unlike other regions, businesses in the Kharkiv region are focused on cutting costs and ensuring the possibility of remote work for their employees to maintain stable operations under martial law. Business forecasts in the Kharkiv region regarding the duration of the war remain very cautious. Fifty-five percent believe the war may end within the next three years, 27% expect it to end in 2025, and 9% anticipate that the war will last for a long time. For reference: The survey was conducted from July 1 to July 30, 2024. Representatives from 83 companies across the regional offices of the European Business Association participated in the study—Western Ukrainian (covering companies from Lviv, Ivano-Frankivsk, Ternopil, and Zakarpattia regions), Southern Ukrainian (covering companies from Odesa, Mykolaiv, and Kherson regions), Dnipro (covering companies from Dnipropetrovsk, Kirovohrad, and Zaporizhzhia regions), and Kharkiv (covering companies from Kharkiv, Sumy, and Poltava regions).

To assess current business conditions, the impact of the war on entrepreneurial sentiment, and to understand the plans and challenges companies face, the EBA has been conducting a business survey for the fifth consecutive year in four regions where its offices are located—Lviv, Odesa, Kharkiv, and Dnipro.

Compared to last year, the business climate ratings in Lviv (2.62 points) and Dnipro (2.20 points) have remained nearly unchanged. Meanwhile, the ratings in Odesa (2.15 points) and Kharkiv (1.45 points) have slightly worsened. Companies generally rate the business environment as challenging, with only the Western region having a majority of companies that consider the conditions satisfactory.

Common challenges across most regions include issues related to mobilization, difficulties in obtaining work exemptions, staff shortages, and power supply deficits. Beyond maintaining operations under martial law, most businesses plan to focus on digitalizing their processes, entering new markets, and expanding their operations. Additionally, entrepreneurs in the Kharkiv region plan to cut costs and organize remote work.

Let’s take a closer look at the situation in each region.

Lviv

For several years now, the highest business climate ratings have consistently come from entrepreneurs in the Western region. However, compared to last year, the number of businesses in Lviv that find it difficult to operate has increased from 28% to 41%. At the same time, 53% consider the business environment satisfactory (down from 72% last year), and 6% say it is easy to conduct business at the moment. Currently, 56% of companies in the region are fully operational, while 44% operate with some limitations.

The main obstacles to doing business in the Western region include issues related to human capital—mobilization, difficulties in obtaining work exemptions for employees, and staff shortages. Eighty-five percent of companies have employees serving in the Armed Forces of Ukraine, with 69% reporting that up to 20% of their eligible workers are currently mobilized, and 16% indicating that 20-30% of their workforce is in the military.

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 entrepreneurs believe the war may end by the end of 2024, while 28% expect it to conclude in 2025, and another 19% think it will end within the next three years.

Dnipro

This year, the Dnipropetrovsk region ranks second in terms of business climate, with a situation very similar to last year’s. Seventy-five percent of entrepreneurs describe the working conditions in the region as difficult, while the remaining 25% find them satisfactory. Currently, only 20% of companies in the region are fully operational, with the other 80% operating with some limitations.

Key challenges in the region include issues related to mobilization and difficulties in obtaining work exemptions for employees. Additionally, as an industrial region, power outages significantly impact business operations. Currently, 60% of companies report that up to 20% of their employees are serving in the Armed Forces, 25% report 20-30%, and 5% report 30-40%. Overall, volunteers or mobilized workers are present in 90% of the surveyed companies in the region.

For the second year in a row, beyond maintaining operations under martial law, companies are focusing on digitalizing business processes and entering new markets. Thirty-five percent of respondents believe the war will end in 2025, while 25% think it will end within one to three years, and 15% expect Ukraine to remain in a state of war for a prolonged period.

Odesa

In the Odesa region, the number of entrepreneurs who consider the business environment difficult has increased from 53% last year to 75% this year. Meanwhile, 20% find the conditions satisfactory, and 5% find them easy. Forty percent of companies in the region are fully operational, while 60% operate with some limitations.

The key challenges for companies in the Southern region include similar factors to those in the Western region—difficulties in obtaining work exemptions for employees, mobilization, and staff shortages. Eighty percent of companies have employees serving in the Armed Forces, with 65% reporting that up to 20% of their eligible workers are currently mobilized, and 15% reporting more than 20%.

Despite the challenges, businesses are focusing on digitalizing their processes and entering new markets, in addition to maintaining their current operations. Twenty percent of the entrepreneurs we surveyed believe the war will end by the end of the year, while 25% think it will end in 2025, and another 25% expect it to conclude within the next three years.

Kharkiv

As expected, the business climate ratings from entrepreneurs in the Kharkiv region are the lowest. All surveyed companies rated the conditions as difficult, with 55% describing them as very difficult. This year, no company rated the business environment as satisfactory, compared to 6% last year. Currently, none of the surveyed companies are fully operational (6% were fully operational last year). Meanwhile, 91% are operating with limitations, and 9% are not operating at all.

The main challenges in the region include power supply deficits, as well as mobilization and difficulties in obtaining work exemptions for employees. Among the companies we surveyed, all have employees serving in the Armed Forces—81% report that up to 20% of their eligible workers are mobilized, and 18% report 20-30%.

Unlike other regions, businesses in the Kharkiv region are focused on cutting costs and ensuring the possibility of remote work for their employees to maintain stable operations under martial law.

Business forecasts in the Kharkiv region regarding the duration of the war remain very cautious. Fifty-five percent believe the war may end within the next three years, 27% expect it to end in 2025, and 9% anticipate that the war will last for a long time.

For reference:

The survey was conducted from July 1 to July 30, 2024. Representatives from 83 companies across the regional offices of the European Business Association participated in the study—Western Ukrainian (covering companies from Lviv, Ivano-Frankivsk, Ternopil, and Zakarpattia regions), Southern Ukrainian (covering companies from Odesa, Mykolaiv, and Kherson regions), Dnipro (covering companies from Dnipropetrovsk, Kirovohrad, and Zaporizhzhia regions), and Kharkiv (covering companies from Kharkiv, Sumy, and Poltava regions).