Ukrainian SMEs in “conservation mode”, new EBRD research shows

• After three years of war, SMEs in Ukraine grappling with strategic and tactical uncertainty and operating in “conservation mode”
• New EBRD-commissioned research looks at challenges facing Ukrainian businesses in wartime
• Survey contains data on representative group of Ukrainian SMEs in production and service sectors

After three years of full-scale war, the majority of Ukraine’s small and medium-sized enterprises (SMEs) are facing strategic and tactical uncertainty and operating in “conservation mode”, a new study published by the European Bank for Reconstruction and Development (EBRD) reveals.

The study surveyed a representative cohort of SMEs across Ukraine to understand the challenges they face, three years on from Russia’s full-scale invasion. Businesses are actively seeking stable markets, with a particular focus on western markets, while constantly striving to find ways to address challenges and cautiously adapt, it reports.

According to the study, of the businesses that remain active, 90 per cent are operating at full capacity and 10 per cent are at partial capacity – compared with 85 per cent and 14 per cent, respectively, in the second year of the war.

The share of businesses reporting increases in staff numbers has risen to 25 per cent during the third year of war, up from 13 per cent in the second year. At the same time, a significant percentage of SMEs are downsizing. Staff reductions were reported by 41 per cent of respondent businesses, compared with 34 per cent in the second year of the war. Meanwhile, only one in six businesses (17 per cent) report a year-on-year increase in profits.

According to the results of the survey, if the war continues for another year or more, 61 per cent of SMEs intend to maintain their current level of activity, compared with 64 per cent in the second year, while the share of businesses planning to diversify or expand remains broadly unchanged at 14 per cent.

The forecasts for future developments in the event of a prolonged war remain mixed: 51 per cent of respondents believe that their business situation will remain unchanged in the near future; 29 per cent expect a decline; 13 per cent anticipate growth; and 1 per cent see their business being wound up. The remaining 6 per cent of company directors report that they are unable to predict how events will unfold. Compared with last year’s figures, the share of respondents with a positive outlook has decreased (down 4 percentage points), while the share of respondents with a negative outlook has increased (up 5 percentage points).

The primary challenges faced by businesses remain staffing problems, uncertainty in forecasting, reduced demand and increased costs. Some of the positive trends reported include product diversification, a search for innovative solutions, increased use of artificial intelligence, and more efficient, automated operations.

Conducted in two stages, the research involved a qualitative survey (16 interviews conducted by expert staff) and representative quantitative research (152 telephone interviews) assessing SMEs in the production and service sectors across Ukraine (excluding the temporarily occupied regions). The full results, which identify both positive and negative trends, as well as key challenges and business needs, are available here.

Donor funding for the survey was provided by Switzerland through the EBRD’s Small Business Impact Fund* and by the European Union (EU) via the EBRD’s Women in Business programme. The EBRD continues to support Ukrainian SMEs by providing development and financial assistance through grants, relocation assistance, opportunities to participate in international exhibitions, crisis management advice, direct and indirect financing, and more. Between 2016 and the end of 2024, EBRD direct financing for SMEs and loans guaranteed through partner banks totalled about €465 million.

The Bank has already deployed more than €7.6 billion in Ukraine since Russia’s full-scale invasion of the country in February 2022. Assisting the private sector is one of the EBRD’s strategic priorities in the country, along with support for energy security, vital infrastructure, food security and trade.

Donors that provided funding for this research in previous years include the EU and the United States of America through the EBRD’s Small Business Impact Fund* and Sweden through the Women in Business programme.

*Donors to the EBRD’s Small Business Impact Fund include Italy, Ireland, South Korea, Luxembourg, Norway, the United Kingdom, the United States of America, Switzerland, Sweden, Japan and the TaiwanBusiness-EBRD Technical Cooperation Fund.