Despite the war, 3 out of 4 SMEs plan to expand their business in 2023

16/ 02/ 2023

These are the results of the Small Business Sentiment Index 2022 conducted by the European Business Association as part of the Unlimit Ukraine project with the information support of the Ministry of Digital Transformation of Ukraine, the Entrepreneurship and Export Promotion Office, and the national project Diia.Business. The survey demonstrates further deterioration in SME sentiment. Thus, the Index fell to 2.4 points out of 5 which is the second lowest value in the history of the study. For comparison, the Index amounted to 2.6 points in 2021 and 2.2 points in 2020. View the presentation Of the entrepreneurs we surveyed, 58% are currently dissatisfied with the state of affairs in their business, a slight increase from 52% in 2021. At the same time, the share of those who are satisfied with the state of affairs has decreased – the current 24% compared to 32% last year. Of all the Index components, the lowest score was given to the economic situation in the country. Thus, 42% of respondents consider it unfavourable, and 29% – catastrophic. These are the realities of wartime. However, it is worth noting that during the active phase of the coronavirus pandemic, these estimates were even worse – 44% of respondents rated the state of the economy as catastrophic. For the second time in the 6 years of the survey, not only the sentiments but also the expectations among entrepreneurs have deteriorated. Currently, the share of those who forecast that the business situation will continue to deteriorate (38%) exceeds the number of those who expect the situation to improve (33%) in the next six months. The following factors have the greatest negative impact on business valuations: active hostilities and proximity to the frontline, destruction, shelling, power and communication outages, inaccessible loans, falling consumer demand and decreased purchasing power, logistics challenges, inflation, and tax pressure. Despite the difficulties, the majority of entrepreneurs, namely 76%, plan to expand their business in 2023. Of these, 28% plan to expand their geography, 26% plan to launch new products, 25% plan to enter foreign markets, and 21% plan to change the number of employees. Most respondents (67%) will raise new funds to expand their business. Most entrepreneurs rely on their own finances (30%) and to a lesser extent on grants (21%) and loans (10%). Compared to 2021, the share of loans used by SMEs has tripled – 32% of companies relied on them then. Loans are traditionally a sore point for small businesses. In 2022, entrepreneurs encountered difficulties in obtaining loans. Among the SMEs we surveyed, 59% consider bank loans to be inaccessible or difficult to access, compared to 40% in 2021. We also asked entrepreneurs how the attacks on the energy infrastructure have affected their businesses. Only 8% of them completely stopped their operations due to the shelling, while another 20% temporarily suspended them. Most are adapting, for example, 45% of entrepreneurs change their work schedule and/or change the volume of production or services. To prepare for such challenges, entrepreneurs have allocated additional funds to purchase generators and other uninterruptible power sources (55%), as well as telecommunications and Internet facilities (41%). At the same time, those who do not have the financial means are forced to adjust to the schedule of outages, including working night shifts. Anna Derevyanko. EBA Executive Director. Small businesses have found themselves in a rather difficult situation during the year of full-scale war, so we are proud of all those who have managed to adapt and continue working in the new environment. Although pessimism prevails among entrepreneurs, it is still somewhat better than at the height of the pandemic in 2020. Let′s hope that the most difficult times are over, and as the largest business association in Ukraine, we will continue to support SMEs within the Unlimit Ukraine project. The year of the full-scale invasion of Ukraine was, as expected, one of the most difficult in our history, and small and medium-sized businesses have faced unprecedented challenges. But despite all this, we see that Ukrainian entrepreneurs are strengthening their resilience and ability to adapt to conditions of great uncertainty. For example, the SME Sentiment Index showed that 76% of entrepreneurs plan to expand their business in 2023 by expanding their business lines, presence geography, or starting exports. Valeria Ionan. Deputy Minister of Digital Transformation for European Integration. The Ministry of Digital Transformation continues to support the entrepreneurial ecosystem, and the survey results give us a vector in which to direct our efforts, particularly within the Diia.Business entrepreneurship development project. Andriy Remizov. Director of the Entrepreneurship and Export Promotion Office. The new challenges faced by Ukrainian entrepreneurs during the full-scale invasion have also revealed potential areas of development. We see an interesting trend in that 25% of entrepreneurs who plan to expand their businesses want to do so by starting exports. The Entrepreneurship and Export Promotion Office is working to ensure that the Export Direction of Diia.Business is actively represented abroad and that Ukrainian businesses find their partners and customers around the world. SMALL BUSINESS ATTITUDES INDEX – conducted by the European Business Association since 2017 within the Unlimit Ukraine project. 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, 2022. Altogether, 325 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 4300 SMEs.

These are the results of the Small Business Sentiment Index 2022 conducted by the European Business Association as part of the Unlimit Ukraine project with the information support of the Ministry of Digital Transformation of Ukraine, the Entrepreneurship and Export Promotion Office, and the national project Diia.Business.

The survey demonstrates further deterioration in SME sentiment. Thus, the Index fell to 2.4 points out of 5 which is the second lowest value in the history of the study. For comparison, the Index amounted to 2.6 points in 2021 and 2.2 points in 2020.

View the presentation

Of the entrepreneurs we surveyed, 58% are currently dissatisfied with the state of affairs in their business, a slight increase from 52% in 2021. At the same time, the share of those who are satisfied with the state of affairs has decreased – the current 24% compared to 32% last year.

Of all the Index components, the lowest score was given to the economic situation in the country. Thus, 42% of respondents consider it unfavourable, and 29% – catastrophic. These are the realities of wartime. However, it is worth noting that during the active phase of the coronavirus pandemic, these estimates were even worse – 44% of respondents rated the state of the economy as catastrophic.

For the second time in the 6 years of the survey, not only the sentiments but also the expectations among entrepreneurs have deteriorated. Currently, the share of those who forecast that the business situation will continue to deteriorate (38%) exceeds the number of those who expect the situation to improve (33%) in the next six months.

The following factors have the greatest negative impact on business valuations: active hostilities and proximity to the frontline, destruction, shelling, power and communication outages, inaccessible loans, falling consumer demand and decreased purchasing power, logistics challenges, inflation, and tax pressure.

Despite the difficulties, the majority of entrepreneurs, namely 76%, plan to expand their business in 2023. Of these, 28% plan to expand their geography, 26% plan to launch new products, 25% plan to enter foreign markets, and 21% plan to change the number of employees.

Most respondents (67%) will raise new funds to expand their business. Most entrepreneurs rely on their own finances (30%) and to a lesser extent on grants (21%) and loans (10%). Compared to 2021, the share of loans used by SMEs has tripled – 32% of companies relied on them then.

Loans are traditionally a sore point for small businesses. In 2022, entrepreneurs encountered difficulties in obtaining loans. Among the SMEs we surveyed, 59% consider bank loans to be inaccessible or difficult to access, compared to 40% in 2021.

We also asked entrepreneurs how the attacks on the energy infrastructure have affected their businesses. Only 8% of them completely stopped their operations due to the shelling, while another 20% temporarily suspended them. Most are adapting, for example, 45% of entrepreneurs change their work schedule and/or change the volume of production or services.

To prepare for such challenges, entrepreneurs have allocated additional funds to purchase generators and other uninterruptible power sources (55%), as well as telecommunications and Internet facilities (41%). At the same time, those who do not have the financial means are forced to adjust to the schedule of outages, including working night shifts.

Anna Derevyanko EBA Executive Director

Small businesses have found themselves in a rather difficult situation during the year of full-scale war, so we are proud of all those who have managed to adapt and continue working in the new environment. Although pessimism prevails among entrepreneurs, it is still somewhat better than at the height of the pandemic in 2020. Let′s hope that the most difficult times are over, and as the largest business association in Ukraine, we will continue to support SMEs within the Unlimit Ukraine project.

“The year of the full-scale invasion of Ukraine was, as expected, one of the most difficult in our history, and small and medium-sized businesses have faced unprecedented challenges.

But despite all this, we see that Ukrainian entrepreneurs are strengthening their resilience and ability to adapt to conditions of great uncertainty. For example, the SME Sentiment Index showed that 76% of entrepreneurs plan to expand their business in 2023 by expanding their business lines, presence geography, or starting exports.”

Valeria Ionan Deputy Minister of Digital Transformation for European Integration

The Ministry of Digital Transformation continues to support the entrepreneurial ecosystem, and the survey results give us a vector in which to direct our efforts, particularly within the Diia.Business entrepreneurship development project.

Andriy Remizov Director of the Entrepreneurship and Export Promotion Office

The new challenges faced by Ukrainian entrepreneurs during the full-scale invasion have also revealed potential areas of development. We see an interesting trend in that 25% of entrepreneurs who plan to expand their businesses want to do so by starting exports. The Entrepreneurship and Export Promotion Office is working to ensure that the Export Direction of Diia.Business is actively represented abroad and that Ukrainian businesses find their partners and customers around the world.

SMALL BUSINESS ATTITUDES INDEX – conducted by the European Business Association since 2017 within the Unlimit Ukraine project. 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, 2022. Altogether, 325 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 4300 SMEs.