Ukrainian business outlines the main problems in its relations with the government
Among them are blocking of tax invoices and violation of legislation by some state bodies
Another wave of regular business surveys* has been carried out in Ukraine. In January–February 2023, 535 entrepreneurs representing various industries from all regions of the country (except fpr Crimea) took part in the survey.
The respondents told us about the factors that had most influenced their business in 2022, as well as their opinion on the reforms that have been implemented and are to be implemented, and the effectiveness of government businesses assistance programmes.
*The study was performed by Advanter Group's methodology from January 25 to February 2, 2023, as part of the Initiative for Economic Recovery, Entrepreneurship and Export Development of Ukraine, implemented by the Centre for Innovation Development, the Entrepreneurship and Export Development Office, the Diya.Business national project, in cooperation with Advanter Group, the Ministry of Economy of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Communities and Territories Development, the Ministry of Digital Transformation, the Ministry for Reintegration of the Temporary Occupied Territories.
Mind presents the most interesting results of the survey and entrepreneurs' responses about main "painful points" and "growth points" for domestic business, as well as expectations from the reforms announced by the government.
The state of business and what hinders its development the most
Most respondents (52.8%) represent small businesses employing up to five people, and only 1.7% are companies with 251 to 1,000 employees. In terms of organisational form, 46.8% of participants are individual entrepreneurs, and 53.2% are legal entities.
Speaking about the condition of companies today, 8% indicated that they were forced to stop working completely, 25.2% had a decrease in workload, 43.4% were partially working, and only 23.3% had an increase in workload or at least remained at the pre-war level.
Instead, in 2023, the vast majority – 81.5% – expect business growth (in hryvnia compared to 2022) by an average of 10.3% (average weighted figure), 10.3% are confident that business will remain at the same level, and 8.2% predict a 10-50% decline.
That said, 60% of companies admitted that the number of orders from customers has decreased over the past month (early 2023), and more than 58% reported a decrease in the volume of products and services provided.
That is why the lack of solvent customers ranks first in the top 7 factors hindering business development: 50.5% of respondents reported it.
Top 7 factors hampering business development:
Due to all the problems in 2022, 55% of companies did not hire a single new employee, but laid off 21.2% of their staff. Of the remaining employees, 18.5% are working on a reduced salary, and 11% have been sent on vacation.
The top 5 problems in dealing with the authorities were:
Interestingly, respondents said that the most frequent violators of the law during business inspections were the State Labor Service (18.5%), local governments at the place of business registration (18.5%), local governments at the place of business operation (15.2%), and the Emergencies (11.8%). Perhaps that is why 82.2% of entrepreneurs polled support (including with some limitations) the introduction of remote business audits.
81.9% said that they do not communicate with oblast state administrations representatives who are supposed to be in charge of restoring business development, and 86.2% have not even heard of any such development programmes.
Meanwhile, the vast majority of respondents have hardly ever used government assistance. Most of the respondents benefited from tax benefits – 15%. 9.1% received loans under the 5-7-9 programme, 8.4% got assistance under grant programmes, and 8.2% obtained assistance under the programme for internally displaced persons. 5.3% were able to receive grants from foreign partners, and 4.2% from Diya.Business. Only 2.9% of respondents managed to exempt their core personnel from the draft.
Instead, almost all the companies surveyed need additional funding to implement their three-year development strategy:
Problems to be solved and expectations from reforms
Compared to November 2022, the number of companies that were not affected by power outages is rapidly decreasing: from 26.6% to 15.1%. 77% report a serious impact on their operations – from 10 to 80% loss of turnover, and 7.8% have practically stopped working due to the lack of electricity.
Despite all the problems described, 80.4% of respondents did not relocate their business, 9.7% changed their place of work within Ukraine and only 1.2% went abroad, and 3.3% are thinking about relocating, although they have not decided which country.
Nevertheless, 69% of respondents believe that the most important issues for the economic bloc of the government to address are corruption (69%), access to loans (44.1%), tax (43.2%) and judicial (40.2%) reforms.
In the case of liberal tax reform, the turnover (revenue) of 40% of companies will hardly change, 46.5% will increase, and 13.1% will decrease. At the same time, the number of employees in 49.6% of companies will remain the same, in 6.8% – will decrease, and in all other companies it may increase by 30-100%. The tax reform will not affect the amount of investment in Ukraine in the case of 43.3% of companies, 8.8% of companies will reduce their investments, and 49.9% may increase by 20-100% or more.
As of now, 28.4% of respondents believe that negative changes are taking place in the regulatory community, another 41.4% observe stagnation, and only 27.6% consider the changes to be positive, and 2.7% even participate in them. 71.7% believe that business deregulation measures are insufficient. At the same time, all respondents said they were trying to participate in the development of deregulation policy principles, while 57.3% said they faced administrative obstacles in this regard.
These factors and problems do not prevent businesses from actively participating in bringing victory closer:
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