Only 3% of companies in Ukraine shut down since crisis broke out - World Bank
MOSCOW. June 26 (Interfax) - Only 3% of companies have shut down since the crisis broke out in Ukraine, while 97% have not halted their operations.
At the same time, large companies were more affected by the crisis, the Ukrainian media reported, citing the World Bank.
"Only 3% of companies in Ukraine have closed. 97% of companies said they are still operating, and out of those 97%, approximately 80%, or four out of five companies, are open or partially open, conducting business and not laying off employees," World Bank Regional Director for Eastern Europe Arup Banerji said during a business day organized by the European Business Association (EBA) on the sidelines of the Ukraine Recovery Conference (URC) in London last Friday.
Companies have shown their resilience, he said. While many have reduced their capacities, they continue to operate, which he described as a "remarkable and inspiring story." He noted that on the one hand, there is a loss of potential, but on the other hand, there is the resilience and fight of companies for their future and further development in Ukraine.
Banerji noted that the crisis has had different impacts on sales volumes and employment across sectors and geographic locations. "Some companies have managed to recover better and cope with the consequences, but all have faced challenges," he said.
On average, sales in the country have declined 53%, while employment has dropped only 26%. The survey results show that the most significant impact was experienced by large companies with over 100 employees. Forty-one percent of large companies reported asset losses, compared to only 15% of small companies (up to 19 employees), the survey said.
The situation varies by region, with sales declines of 70% and 63% in eastern and southern Ukraine, respectively, while the drop in the western regions was only 39%. Small and medium-sized companies have shown greater resilience as they were able to adapt and respond more flexibly, Banerji said.
The construction, industrial, and tourism sectors have been most severely affected, along with a decline in steel production. However, some furniture manufacturers, mainly located in western Ukraine, have managed to profit, including by replacing Russian and Belarusian enterprises that left the market due to sanctions.
Cement production has decreased nationwide. By summer 2022, companies had managed to restore 30-50% of pre-crisis production volumes. However, they were later negatively affected by blackouts. The situation varies by region, with cement production continuing to decline in the Nikolayev region but increasing in the Khmelnitsky region.
Seventy-five percent of exporters have reduced volumes due to logistics problems and disruptions in supply chains, including reduced access to the Black Sea ports. Sixty-six percent of raw material and intermediate goods importers have also slashed or halted supplies, with 80% of them being major importers. "Exports are taking place through overland routes, mainly by road to Poland and Romania, the Danube cluster ports, and Polish ports, but the volumes going through them are significantly smaller." Banerji said.
Nearly half of all companies, including 69% of large companies, have already encountered or could face financial problems in the near future. The main barriers to obtaining financing are uncertainty, high interest rates, and the requirement for collateral, as the study said.
According to the European Business Association, transnational companies have not only maintained investment in Ukraine, but also have not cut it. Some companies are increasing their investment, directing it mainly to reconstruction, but also to the purchase of new assets.
Along with optimistic assessments, the World Bank regional director for Eastern Europe has expressed concern that despite the existence of the government programs to support businesses, in particular, to reduce the interest rates on loans, small and medium-sized companies are not covered by them, and sometimes are unaware of them. Companies in eastern Ukraine are also the least supported. Only 6% of companies (with 9-19 employees) are receiving support from the state compared to 12% of medium-sized companies (20-99 employees) and 17% of large companies (over 100 employees). Five percent of companies from the construction industry and 3% of companies from the tourism industry are receiving support. About 30% of companies are unaware of government support.
The study was based on a survey conducted by a pool of business companies operating in Ukraine (2,500, including small companies with up to 19 employees), the medium-sized ones (20-99) and the large ones (over 100 employees). Over 80 transnational companies with a focus on investment or its withdrawal, and their plans for the future were surveyed, as well. In addition, the high-frequency satellite data were used to analyze the processes of economic activity in Ukraine.