More and more SMEs are resuming work but their financial resilience is declining
These are the results of the third survey conducted by the European Business Association among representatives of SMEs – Unlimit Ukraine participants. In fact, small businesses have been gradually resuming operations for the third month in a row. Thus, 42% of entrepreneurs did not work in March, 26% – in April and now only 17% are currently out of work.
Among non-working companies, 16% plan to resume operations. Now, 21% of SMEs are working in full, while 38% – partially or with restrictions.
At the same time, small entrepreneurs note that their financial resilience is deteriorating. Currently, 34% report that their financial reserves will be enough for several months, previously 40%. Another 12% have reserves for one month, and the other 12% – for six months. Only 5% have sufficient financial reserves for a year or more. Currently, 29% of companies report a lack of reserves, while a month ago that was 26%.
Accordingly, the SMEs’ capabilities to support their staff are reduced – the situation with the payment of salaries to employees has deteriorated slightly over the past month. Salaries are now paid in full by 23% of companies, and only 2% have retained additional or advance payments. Another 32% had to reduce their salaries, 21% were unable to make payments, and 12% were forced to lay off employees.
For comparison, a month ago, 25% of companies paid their salaries in full, 27% cut salaries and 9% of SMEs resorted to dismissal.
However, small businesses still prioritize the support of the armed forces and humanitarian efforts. More than half, namely 57% continue to provide finances, 19% – products, 15% – services, 6% – means of protection/defense, and 4% – medicines. Another 12% support their employees who have joined the ranks of Ukraine’s defenders. However, more and more companies report that they have exhausted their resources to help: last month there were 18%, now – 27%.
Besides, 37% of respondents estimate their war-related losses at up to 10 thousand USD, another 32% – in the range of 10-50 thousand USD, 11% – in the range of 50-100 thousand USD, and 12% – more than 100 thousand USD. Only 5% of SMEs report no losses. At the same time, 23% of the surveyed businesses report damage to property or assets resulting directly from hostilities.
Meanwhile, 72% of respondents did not apply for any kind of support program – neither national nor international. Although 15% used the option of paying a single 2% tax, 6% – other tax benefits, and 2% – compensation for employment of IDPs.
Nevertheless, 19% of entrepreneurs expect a positive dynamics of their business development by the end of the year, i.e. almost one in five. Another 16% predict that the situation will not change significantly, and 62% expect negative dynamics. Also, 47% will not change the team, while 39% will be forced to lay off employees, and only 10% plan to recruit new ones. Most entrepreneurs, namely 54%, also hope to keep salaries at the current level, 22% of companies are projected to make salary cuts, and 13% of SMEs plan to increase salaries.
A full-scale war turned into a marathon and not every business is ready for it. SMEs have been particularly affected by the consequences of the war as they have fewer resources and opportunities than big or international corporations. We see that although the first shock has passed and the vast majority are trying to resume work, a third of entrepreneurs today no longer have financial reserves. Their capabilities to pay salaries and fulfill other obligations are decreasing every month and accordingly the opportunities to help defenders and the people of Ukraine.
The survey was conducted from May 24 to June 6 among individual entrepreneurs participating in Unlimit Ukraine by the EBA.
Unlimit Ukraine is a project that supports small and medium-sized businesses in Ukraine. Altogether, 178 businesses took part in the survey.