The 19th wave of the study of the state and needs of micro, small and medium-sized businesses (MSMEs) in the context of the great war in Ukraine has been completed. The survey was conducted by the Innovation Development Centre, the Entrepreneurship and Export Development Office, the national project Diia.Business, and AdvanterGroup in cooperation with the Ministry of Economy of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Community and Territorial Development of Ukraine, the Ministry of Digital Transformation, and the Coalition of Business Communities for the Modernisation of Ukraine.
Survey period: 12.11.2024 – 12.12.2024 р.. A total of 628 respondents were interviewed – owners and CEOs of MSMEs.
1. State of the business environment
As of December 2024, the UBI (Ukrainian Business Index) stands at 36.9 (out of 100). The index continues to decline compared to the previous two waves of the survey (39.9 in August and 43.7 in May 2024), and is at the level of November-December 2023(36.3) in the zone of negative expectations.
For reference: The UBI indicates business activity, its ability to increase turnover and create jobs. If the indicator is below 50, this indicates negative business expectations of further developments.
2. MSME support for the Armed Forces of Ukraine and participation in humanitarian projects
The vast majority of businesses (70.4%) continue to invest in helping the Armed Forces of Ukraine.
Only 20.8% of respondents said they were unable to make contributions.
3. Business performance
The actual results for 2024 did not fully meet expectations. For example, 29.6% of respondents expected growth, but only 24.5% managed to achieve it.
The situation was expected to be maintained at the level of the previous year by 30.9%, and 27.4% managed to achieve this.
A decline in volumes was observed in 46.6% of respondents, while only 36% of them had such expectations, which is about 1.5 times more than expected.
The fact that 3.5% of respondents expected closure or suspension of business is encouraging, but only 1.3% did, almost 3 times less than expected.
It is worth noting that the vast majority of respondents (60.1%) show a tendency to unite in business communities to defend their rights and share experiences.
4. Staffing situation
The largest shortage of staff (55.5% ) is observed in production, followed by 33.1% in engineering and 22.3% in logistics.
Against the backdrop of staff shortages, it is worth noting that 74.4% of respondents raised salaries to motivate and retain employees, while 20.3% of respondents left salaries unchanged.
In addition, the share of retirement-age employees is increasing to fill the 46.1% of vacancies.
4. Business challenges
The unpredictability of the situation in Ukraine and the domestic market(60.8% vs. 58.3% last year) and unpredictable government actions that could worsen the business environment(58.9% vs. 50.7% last year) are becoming relevant for more than half of the respondents.
Other major problems include the general solvency of the population(51% vs. 49.4%) and the lack of a sufficient number of skilled workers(50.3% vs. 42.1% last year).
These data suggest a general deterioration in the situation for businesses compared to last year’s survey.
Among the problems in relations with the authorities, almost a third of respondents complain about the blocking of tax invoices(29.6%) and the refusal to book conscripts for military service(26.4%).
The overwhelming majority of respondents(84%) do not feel that the dynamics of pressure on business has changed, while 14.6% say that pressure has increased and significantly increased. Only 1.5% say that the pressure has eased.
Among the key decisions expected by the vast majority of respondents from the authorities are the introduction of reservations for critical personnel(62.7%), cancellation or revision of special pensions(57.3%), reboot of the customs service(56.1%) and the tax service(53.5%).
Overall conclusion: The index of business activity (UBI) has decreased to 36.9, indicating negative expectations of entrepreneurs. Despite the economic difficulties, 70.4% of businesses continue to support the Armed Forces. The actual performance in 2024 did not meet the expectations of most entrepreneurs, and staff shortages remain a critical issue, especially in manufacturing, engineering, and logistics.
The main challenges for business are the unpredictability of government policy, the unstable economic situation, low solvency of the population, and a shortage of skilled workers. Entrepreneurs also complain about bureaucratic problems, such as blocking tax invoices and difficulties in booking staff.
Businesses expect the government to reform the booking of critical personnel, review special pensions, and change the work of the customs and tax services. Despite all the challenges, more than 60% of entrepreneurs are seeking to unite in business communities to jointly defend their interests.
The study was conducted within the framework of the United Nations Development Programme (UNDP) Support to Ukraineproject by the Innovation Development Centre, the Entrepreneurship and Export Development Office, the national project Diia.Business, and Advanter Group in cooperation with the Ministry of Economy of Ukraine, the Ministry of Finance of Ukraine, the Ministry of Community and Territorial Development of Ukraine, the Ministry of Digital Transformation, and the Coalition of Business Communities for the Modernisation of Ukraine.