Logistical difficulties and personnel outflow are the main challenges of business in the regions of Ukraine
The level of regional development is an important indicator of the country’s economic and social development, which, among other things, depends on the success and activity of local businesses.
Therefore, the European Business Association conducted for the third time a survey of regional businesses on the conditions for entrepreneurial activity at the local level. We evaluated the experience of companies in four strategic regions where the regional offices of the Association are situated – Lviv, Odesa, Kharkiv, Dnipro – and compared the dynamics of business climate development.
The situation in most regions is expected to worsen this year. Currently, it is difficult for most companies to conduct business in all regions, and the drop in ratings in Kharkiv – 1.28 points and Dnipro – 1.88 points out of 5 is particularly dramatic. The situation in Odesa – 2.15 points and Lviv – 2.52 points remains more stable compared to last year. The integral assessment of all regions remains in the negative plane.
Let’s take a closer look at the situation in each of the regions.
Like last year, Lviv entrepreneurs rated the business conditions in their regions the highest among others. Thus, 56% of respondents claim that the level of development of the business climate in the region is satisfactory, 41% say that it is difficult for them to do business, and only 3% believe that it is easy. For comparison, last year business conditions were rated as favorable by 24%.
Entrepreneurs of the western region note disruption in logistics, a decrease in purchasing power, and difficulties with reserving employees from mobilization among the current business problems. The plans of the companies until the end of the current year are to maintain operations under martial law, digitize business processes and reduce business expenses.
63% estimate their business losses during martial law to be up to 50% of income, and 19% – more than 50%. Only 12% of entrepreneurs did not experience losses, and 6% managed to make a profit.
Odesa takes second place this year in terms of ease of doing business. At the same time, 71% of our respondents answered that it is difficult for them to do business in the region, and the other 29% – that it is satisfactory (previously there were 44%). Last year, not a single entrepreneur answered that it was easy for him to work.
The two top problems, as in Lviv, Odesa respondents identified difficulties with logistics and a decrease in the purchasing power, in third place – the outflow of personnel abroad. In the future, the companies plan to focus on supporting the company’s activities in the conditions of martial law, entering new markets and plan to optimize the company’s staff.
All companies report losses as a result of hostilities. At the same time, there are two groups, one half estimates losses up to 50%, and the other – more than 50%. None of the companies we surveyed made a profit.
Most companies, namely 75%, rate the conditions of doing business as difficult (last year there were 52%), and 25% – as satisfactory. At the same time, 19% of companies had to resort to business relocation.
Among the top problems of the region, entrepreneurs named the loss of assets in the occupied territories, difficulties with logistics, and the outflow of personnel abroad. In addition to maintaining operations under martial law, companies will focus on entering new markets and will be forced to cut costs.
A quarter of businesses report losses of more than 50% of revenues, and the other 75% report losses of less than 50% of revenues.
For obvious reasons, Kharkiv entrepreneurs rated the conditions in which they currently have to work the worst. Meanwhile, 14% of Kharkiv entrepreneurs resorted to relocation within Ukraine.
Almost all of the companies we surveyed, namely 93%, reported that it is difficult for them to do business, and only 7% consider the current conditions to be satisfactory. Last year, it was difficult for 45%, and 41% of respondents gave a satisfactory assessment.
Businesses in Kharkiv consider the outflow of personnel abroad, a decrease in purchasing power, and the loss of assets in the occupied territories to be the main problems at the moment. In the future, the companies plan to focus on supporting activities in the conditions of martial law, plan to optimize the company’s staff, and provide the opportunity for employees to work remotely.
Not all companies are currently able to estimate the scale of losses due to the location of branches or offices in the occupied territories. At the same time, 57% of companies already estimate their losses in the amount of more than 50% of revenues, and another 28% – up to 50%.
The survey was conducted from August 15 to September 21, and representatives of 90 companies from regional offices of the European Business Association took part in the study.