Business Development in the South Depends on Infrastructure Restoration and Diversification

10/ 08/ 2024

The overall assessment of business conditions in the Southern region has worsened this year, returning to the 2022 level—down to 2.15 points (from 2.47 points in 2023). These are the results of a survey conducted by the European Business Association among member companies from regional offices. It is evident that Russian attacks on the Southern region are creating significant challenges and negative consequences for the operations of companies. The percentage of entrepreneurs who consider business conditions difficult has increased from 53% last year to the current 75%. Meanwhile, 20% find the conditions satisfactory, and 5% find them easy. Overall, 80% of respondents believe that business conditions have deteriorated over the past year. Currently, 40% of companies in the region are operating at full capacity, while 60% are working with certain limitations. Notably, three-quarters of survey participants did not relocate from the region. To support and develop their businesses, 20% of the surveyed companies have secured grant funding. Only 20% of companies have not suffered any losses due to the war. Meanwhile, 40% report losses of up to $1 million, 25% report losses ranging from $1-10 million, and 15% report losses exceeding $10 million. The key challenges for companies in the Southern region include difficulties in reserving employees, mobilization, and labor shortages. 80% of companies have employees serving in the Armed Forces of Ukraine, with 65% reporting that these employees make up to 20% of their eligible workforce, and 15% reporting more than 20%. Additionally, 85% of businesses support the introduction of economic reservation for employees. Among the factors that positively influence the business environment, companies highlight the digitalization of government services, the operation of ports and improvement of logistics, accessible financing, and support from regional authorities. At the same time, businesses are calling for transparency in legislation and consistent rules of the game, restoration and preservation of infrastructure, and further digitalization of interactions with government agencies to improve the business environment. Among local authorities, the highest ratings in the Odesa region this year go to the Regional Military Administration and the tax service. However, businesses believe that interactions with the Territorial Recruitment and Social Support Centers and the city council (Odesa) require improvement. Only 20% of the entrepreneurs we surveyed believe that the war will end by the end of the year. Another 25% believe the war will end in 2025, while another 25% think it will end within the next three years. Despite the challenges, businesses are focused on the digitalization of business processes and entering new markets, in addition to maintaining current operations. According to businesses, the post-war reconstruction of the Southern region should take into account the need for the restoration and development of infrastructure, creating conditions to attract investors and return people, developing alternative energy sources and improving energy efficiency, reforming waste management, and implementing economic reforms. For reference: The survey was conducted among member companies of the Southern Ukrainian office of the European Business Association from July 2 to 26, 2024. The full report is available via this link.

The overall assessment of business conditions in the Southern region has worsened this year, returning to the 2022 level—down to 2.15 points (from 2.47 points in 2023). These are the results of a survey conducted by the European Business Association among member companies from regional offices. It is evident that Russian attacks on the Southern region are creating significant challenges and negative consequences for the operations of companies.

The percentage of entrepreneurs who consider business conditions difficult has increased from 53% last year to the current 75%. Meanwhile, 20% find the conditions satisfactory, and 5% find them easy. Overall, 80% of respondents believe that business conditions have deteriorated over the past year.

Currently, 40% of companies in the region are operating at full capacity, while 60% are working with certain limitations. Notably, three-quarters of survey participants did not relocate from the region. To support and develop their businesses, 20% of the surveyed companies have secured grant funding.

Only 20% of companies have not suffered any losses due to the war. Meanwhile, 40% report losses of up to $1 million, 25% report losses ranging from $1-10 million, and 15% report losses exceeding $10 million.

The key challenges for companies in the Southern region include difficulties in reserving employees, mobilization, and labor shortages. 80% of companies have employees serving in the Armed Forces of Ukraine, with 65% reporting that these employees make up to 20% of their eligible workforce, and 15% reporting more than 20%. Additionally, 85% of businesses support the introduction of economic reservation for employees.

Among the factors that positively influence the business environment, companies highlight the digitalization of government services, the operation of ports and improvement of logistics, accessible financing, and support from regional authorities. At the same time, businesses are calling for transparency in legislation and consistent “rules of the game,” restoration and preservation of infrastructure, and further digitalization of interactions with government agencies to improve the business environment.

Among local authorities, the highest ratings in the Odesa region this year go to the Regional Military Administration and the tax service. However, businesses believe that interactions with the Territorial Recruitment and Social Support Centers and the city council (Odesa) require improvement.

Only 20% of the entrepreneurs we surveyed believe that the war will end by the end of the year. Another 25% believe the war will end in 2025, while another 25% think it will end within the next three years. Despite the challenges, businesses are focused on the digitalization of business processes and entering new markets, in addition to maintaining current operations.

According to businesses, the post-war reconstruction of the Southern region should take into account the need for the restoration and development of infrastructure, creating conditions to attract investors and return people, developing alternative energy sources and improving energy efficiency, reforming waste management, and implementing economic reforms.

For reference:

The survey was conducted among member companies of the Southern Ukrainian office of the European Business Association from July 2 to 26, 2024. The full report is available via this link.