The State and Needs of Business in Times of War: Survey Results in January 2023
21 February, 2023
The Center for Innovation Development, the Entrepreneurship and Export Promotion Office, the national project Diia.Business, and the strategic agency Advanter Group conducted the tenth wave of business research in Ukraine during Russia's full-scale military aggression against Ukraine.
Survey period: 25.01 — 02.02.2023 A total of 535 business owners and CEOs were interviewed.
Key findings of the study
1. State of the business environment
The Ukrainian Business Index (UBI) equals 30.76 (out of a possible 100). The index has hardly increased compared to November 2022 (30.04) and is lower than in September (33.9).
For reference: UBI shows business activity, its ability to increase turnover and create jobs. If the indicator is below 50, it indicates negative business expectations from further developments.
2. Work of enterprises
The positive dynamics of enterprises is still observed. 14% of enterprises reported an increase in the volume of work compared to the period before the full-scale invasion, and another 9.3% of enterprises reached the indicators of 2021.
In addition, according to the results of 2022, 26.5% of enterprises completely or almost completely stopped working. This is lower than in November, when 31.7% of enterprises remained completely or almost completely inactive.
3. How business sees the prospects for 2023
45.5% of enterprises forecast an increase in business volumes in 2023 compared to 2022. Among them, 8% of enterprises forecast significant business growth. At the same time, 24.1% of companies expect to achieve results almost similar to 2022, and 28.8% predict a decline in business.
At the same time, business forecasts for 2023 differ significantly by region. Thus, 56% of enterprises in the central regions, 46% of enterprises in the western regions, and 45% of enterprises in the northern regions expect growth. The largest decline is expected by enterprises in the northern (24%), central (23%), eastern (20%), and southern (17%) regions. At the same time, 19% of respondents from the southern and 20% from the eastern regions expect that their business will not work in 2023.
4. Situation with staffing
The business continues to hire back employees and create new jobs. The share of staff (as of 23.02), currently downsized, fell to 21.2% in January (24.5% in November), but it is higher than in June (20%). Another 11% is hidden unemployment, and there is a downward trend compared to June.
5. What prevents businesses from recovering
In January, the importance of two main obstacles to business recovery increased – the insufficient number of solvent customers in Ukraine and the unpredictability of the situation in Ukraine. In addition, financial problems (lack of sufficient capital), unpredictability of government actions, unavailability of loan and grant programs announced by the government, and obstacles from regulatory/fiscal authorities remain among the main obstacles to business recovery, but the importance of these obstacles has slightly decreased compared to November's assessment.
Blocking tax invoices and delays in logistics at the border (queues at customs points) remained the key problems in relations with the authorities, which were also top of mind in November 2022. The problem of refusing to reserve conscripts has grown in importance, displacing denial of access to government support programs (grants, 5-7-9, etc.) from third place.
The impact of the power outage on business has intensified: 65.6% of surveyed companies reported a 20% or more decrease in turnover due to the outage (compared to 48% in November), with 16.7% of companies losing about half of their turnover, another 12.8% of companies losing up to 80% of their turnover, and 7.8% of companies practically shutting down.
6. Business interaction with the state
Compared to November 2022, the number of businesses that took advantage of tax breaks, eRobota grants, and loans under the 5-7-9% program has increased.
At the same time, 36% of enterprises are interested in participating in public procurement, and an additional 10.5% may join after the end of the war.
On average, the share of revenue generated through cooperation with state-owned companies is 8.6%.
The top priorities for the government are fighting corruption (69% of respondents), improving access to loans and making them cheaper (44%), and implementing tax and judicial reforms (43% and 40%, respectively).
The business community is not sufficiently involved in the development and adoption of management decisions aimed at simplifying the regulatory environment.
However, 27% of respondents are involved in various forms of stakeholder engagement (open discussions, making proposals, drafting regulations).
More than a half (57.3%) indicated that they had administrative obstacles to participating in events aimed at broad discussion of deregulation issues.
15.6% do not participate in them at all.
This indicates that the authorities do not have a mechanism for systematic involvement of the business community in the development of regulatory acts, discussion and revision.
It was worth hearing the opinion of entrepreneurs: what problems do they face in the licensing system, including during martial law?
- high level of requirements to the material and technical base and staffing – 31.2% of respondents;
- requiring additional documents for obtaining permits, including those not provided for by law – 14.7%.
We asked the business once again about the launch of the SRS initiative to conduct “online checks”.
Thus, 82% of entrepreneurs fully supported the relevant project to transfer the state's supervisory function over business into online mode.
At the same time, 32% of businesses believe that the existing procedure for on-site inspections should be preserved for certain areas of control work.
Based on the survey results, the biggest problem for businesses in Ukraine is unpredictability.
It is quite justified that entrepreneurs are in favour of continuing deregulation and digitalization of business activities during martial law.
View the full version of the study in pdf format
- The study was conducted by the Center for Innovation Development, Entrepreneurship and Export Promotion Office, the national project Diia.Business, together with Advanter Group with the support of the Ministry of Digital Transformation, the Ministry of Economy of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Community and Territorial Development, the Ministry for Reintegration of the Temporarily Occupied Territories, the Coalition of Business Communities for the Modernization of Ukraine.
- The study was prepared within the framework of the Initiative for Economic Recovery, Entrepreneurship and Export Development of Ukraine.