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Ukrainian entrepreneurs slightly improved the ease of doing business in the regions

The state of regional business and the activity of entrepreneurs on the ground during the war require special attention since each Ukrainian region, despite varying distances from the frontline, has faced its challenges and difficulties.


Therefore, the European Business Association is conducting a regional business survey for the fourth time in four strategic regions where the EBA’s regional offices are located – Lviv (representing companies from western regions), Odesa (representing companies from southern regions), Kharkiv (representing companies from eastern regions), and Dnipro (representing companies from some central regions). Compared to 2022, the assessments of doing business in all regions have slightly improved, but they remain in the negative range on a 5-point scale (where 3 represents a neutral assessment).


In Lviv, businesses rated the situation with 2.64 points, in Odesa – 2.47 points, and in Dnipro – 2.25 points. In these regions, according to businesses, the situation is somewhat better than in Kharkiv, which received a rating of 1.62 points. However, across these regions, companies predominantly evaluate the conditions of doing business as challenging, and only in Lviv do the majority consider them satisfactory.


Common challenges for most regions include issues related to mobilization, predictability of reservation procedures, workforce outflow abroad, and international business trips. In the majority of regional companies, up to 20% of eligible employees are currently serving in the armed forces, with the most tense situation in the Western region, where only 4% of companies have no mobilized workers. When planning their activities, most companies are aiming for the end of the war within a timeframe of one to three years.


Let’s take a closer look at the situation in each of the regions.


Lviv


Just like last year, entrepreneurs in the Western region have rated the conditions for doing business higher than in other regions. Specifically, 72% consider the conditions satisfactory, 20% find them challenging, and 8% find them very challenging. For comparison, last year, 56% rated the conditions as satisfactory, and 41% found them challenging. Additionally, 76% of the region’s companies are operating at full capacity, while 24% are operating with certain limitations.


Among the main issues faced by businesses in the Western region, entrepreneurs highlight the mobilization of workers and the related difficulties in reserving employees and arranging short-term business trips abroad. Other negative factors include a decline in purchasing power among the population and unpredictable actions by the government that could negatively impact business conditions.


Indeed, the situation with mobilizing workers in the Western region is the most tense. Only 4% of companies have no mobilized employees. 84% have mobilized up to 20% of their eligible workers, 8% have mobilized 20-30% of their employees, and 4% have mobilized 30-40% of their workforce.


Companies’ plans until the end of the current year include maintaining operations under the conditions of martial law, digitizing business processes, expanding their businesses, and replacing last year’s plan to reduce expenses. Only 4% of entrepreneurs believe that the war may end by the end of 2023, while the majority (56%) think it will take one to three years, and an additional 16% anticipate a prolonged war.


Odesa


For the second year in a row, Odesa ranks second in the assessment of the business environment. Currently, 53% of the surveyed entrepreneurs report that doing business in the region is challenging (compared to 71% last year), 41% find it satisfactory, and 6% find it easy. About 47% of companies in the region are operating at full capacity, while the remaining 53% are operating with certain limitations.


Among the top issues identified by entrepreneurs in the region are workforce outflow abroad, logistics difficulties (the survey was conducted before the massive strikes on Odesa’s port infrastructure), corruption, and unpredictable actions by the government that could negatively impact the business environment.


In the future, companies plan to focus on supporting their operations under the conditions of martial law, expanding their business, entering new markets, and increasing their workforce, whereas last year, the plans involved reducing the workforce.


In 76% of the companies, up to 20% of their eligible employees are currently serving in the armed forces, while in 18%, there are no mobilized workers. Regarding the end of the war, 12% of the surveyed entrepreneurs believe it will happen by the end of the year, 53% think it will end in 2024, and 24% expect it to last for the next three years.


Dnipro


The percentage of entrepreneurs in the region who consider the business conditions challenging has slightly decreased compared to last year – from 75% to 69% – although they still form the majority. The remaining 31% find the conditions satisfactory. At the same time, only 38% of companies in the region are currently operating at full capacity, while the rest, 63%, are operating with certain limitations.


Regarding the top issues in the region, the surveyed companies identified difficulties with international business trips and employee reservations, a decline in the purchasing power of the population, and corruption. One-third of companies in the Dnipro region, precisely 31%, have no mobilized employees, while 56% have mobilized up to 20% of their eligible workers.


Besides supporting operations under the conditions of martial law, companies will focus on entering new markets, digitizing business processes, and planning business expansion by the end of the year. Regarding the end of the war, 13% of the surveyed entrepreneurs believe it will conclude by the end of 2023, while the majority, 69%, think it will end within one to three years, and an additional 13% believe that Ukraine will remain in a state of war for a prolonged period.


Kharkiv


For the second consecutive year, companies in the Kharkiv region rated the business environment as the most challenging. A total of 94% reported that doing business is difficult (compared to 93% last year), with 44% of them finding it very challenging. Only 6% assessed the business conditions at a satisfactory level.


Among the surveyed companies, only 6% are operating at full capacity, while 63% are operating with limitations, and 31% are not working at all. The main challenges for businesses are cited as a decline in the purchasing power of the population, workforce outflow abroad, and employee mobilization.


For 56% of entrepreneurs in the region, up to 20% of their eligible workers are mobilized, while 19% have no mobilized employees. By the end of the year, companies plan to focus on supporting operations under the conditions of martial law, entering new markets, and resorting to expense reduction.


Meanwhile, businesses in the Kharkiv region have the gloomiest forecasts regarding the duration of the war. While 19% believe it could end by the end of 2023, 44% expect it to conclude within one to three years, and 31% believe that the war will last for a prolonged period.


For reference:

The survey was conducted from July 4 to July 24, with the participation of representatives from 74 companies in the regional offices of the European Business Association.

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