Ukraine sees surge in new businesses as economy moves to war footing
Firms transformed to produce war supplies and a self-employment boom are driving a rapid recovery in business creation in Ukraine after a collapse in the early stages of Russia’s invasion.
Ukrainians set up more than 65,000 new businesses during the first five months of the war with the recovery gaining momentum after Vladimir Putin was forced to scale back his invasion plans, according to official figures provided to the Telegraph.
Valeriya Ionan, a minister in Ukraine’s digital transformation ministry, said that many entrepreneurs changed “their main focus” to war essentials, including food and clothes, and relocated to start over after the conflict erupted.
She told The Telegraph: “Some companies literally lost everything because of the full-scale invasion, starting from production property to warehouses, and logistic routes. So they had to start everything over.
“There are lots of businesses who did some services before, and now they're doing small manufacturing. Therefore they had to relocate from the eastern regions of Ukraine to the central or western [regions], where they are starting the business from scratch.”
Business creation collapsed more than 90pc year-on-year in March when the war first started but has bounced back.
Almost 20,000 companies and individual entrepreneurs registered in June alone. That figure is down just a third from a year earlier despite the war still raging in the east and south of Ukraine and a huge slump in GDP.
Of the 65,000 business registrations since March, just under 4,500 are legal companies and the rest are individuals that are newly self-employed largely in IT, many of whom were made unemployed by the war.
Ms Ionan said: “A lot of people lost their jobs and they had to become self-entrepreneurs. In order to do that, you have to register as an individual entrepreneur or a company.”
Her department is aiming to rebuild Ukraine’s economy by making it easier and quicker to set up businesses and providing firms advice through its Diia.Business project. The Government has launched a version to help millions of Ukrainian refugees work and set up businesses in their new countries.
“After the start of the full-scale war we have adapted our work to the new reality, but we are still continuing to develop lots of things,” she said.
“The big goal of the Diia.Business is to build a full-fledged, efficient, and effective ecosystem for the development of small and medium enterprises.”
Nonetheless the war has taken a heavy toll on both Ukraine and Russia’s economies.
The International Monetary Fund has predicted that GDP in Ukraine will contract by more than a third in 2022 after swathes of the country became battlegrounds. It expects Russian output to fall by 6pc after the wave of Western sanctions and boycotts by companies.
However, economic activity in parts of Ukraine may stabilise as the Kremlin refocuses its efforts. Fighting is now largely confined to the eastern and southern regions of Ukraine after the Kremlin’s disastrous attempt to take the entire country. Ukraine has also launched a counter-offensive in a bid to retake land.
