In 2020, whatever didn’t kill business, made it stronger – or at least that’s what owners hope.
Those who survived also adapted. They switched online, started producing new products and managed to stay afloat.
Shutting down entrepreneurs
The Ukrainian government introduced a full lockdown in March-May, offering no state support for those who were forced to close their businesses. Six percent of all the companies in Ukraine closed right away.
The biggest damage took a toll in the hospitality and tourism industries.
Facing the new reality, many small- and medium-sized businesses had to go online. Although still having to lay off staff, many restaurants, for example, rolled out delivery and managed to stay afloat.
Venues like museums and cinemas, in turn, had no choice but to stop all their operations. Multiplex, a network of cinemas, laid off up to 58% of the staff, while Planeta Kino cut salaries by half.
Dmytro Derkach, cofounder of Planeta Kino, says that the network has been losing $175,000–$350,000 every month since the beginning of the pandemic.
After the borders were closed, the number of tourists has dropped drastically. Many small travel agencies shut down or switched to local tours around Ukraine, while airports and airlines worked serving only a limited number of passengers.
People pass by a building with a sign that reads “for rent.” The TUI travel used to rent this place, but after Ukraine imposed a full economic lockdown in March, the agency had to move out to save money. Tourism is one of the industries that have suffered most from the coronavirus pandemic in 2020. (Oleg Petrasiuk)
Even giant Ukraine International Airlines (UIA) has suffered losses that reached $60 million in July 2020. The company has laid off 1,000 workers and, in December, said it would fire of at least 140 pilots.
Now UIA pleads President Volodymyr Zelensky for a stabilization loan and installments to the state enterprises Boryspil International Airport and Ukraerorukh.
All businesses took another hit when the government imposed the weekend lockdown from Nov. 14 to Nov. 30, requiring cinemas, eateries, beauty salons, gyms and shopping malls to stop serving their clients during weekends — the time when they usually make most of their money.
The turnover of Ukrainian shopping malls decreased by 30-40% during this period. According to various estimates, their losses might have reached $247 million.
This all has led to the rise of unemployment. By the autumn, over 450,000 Ukrainians reported unemployment, 180,000 more compared to the same period last year.
The weekend lockdown caused the second upsurge in the number of unemployed in November.
“At the beginning of the quarantine, we had 361,000 registered unemployed, today — 420,000,” Denys Shmyhal, prime minister, said in the Dec. 10 interview with news website Ukrainska Pravda.
The fact that the state hasn’t initiated any substantial help to businesses — tax reliefs, cancelation of rental fees, or postponement of credit payments — has caused massive protests across Ukraine.
State support
Since the beginning of the pandemic, Ukrainian entrepreneurs have protested and asked the officials to ease lockdown restrictions, to provide them with financial assistance and to introduce some tax reliefs.
As a result, in December, the parliament passed three bills to support businesses amid the crisis. Now the government proposes tax reliefs for them and one-time economic assistance of $280 for individual entrepreneurs. As of Dec. 18, Ukrainians have submitted over 200,000 electronic applications for the assistance.
The government will allocate money from the COVID-19 fund to support business.
Nevertheless, individual entrepreneurs keep protesting. On Dec. 15, their rally in Kyiv even turned violent, as they clashed with police.
Protesters oppose the upcoming lockdown and call the parliament to pass bills protecting the country’s simplified tax regime for independent entrepreneurs as well as to impose a temporary moratorium on all types of inspections.
Police officers stand guard as entrepreneurs protest against governmental plans to impose a winter lockdown to curb the spread of COVID-19 in central Kyiv on Dec. 15, 2020. (Oleg Petrasiuk)
Kateryna Glazkova, executive director at the Union of Ukrainian Entrepreneurs, says that any help is better than none, but one-time $280 assistance won’t help businesses if they are already on the verge of bankruptcy.
“Not everyone has survived this lockdown, and the situation will get even more difficult,” she said. “There will be no quick recovery for anyone. This is a deep systemic crisis for everyone, even for areas where everything looks good.”
One of the reasons, according to her, is the decline of the purchasing power among Ukrainians.
Anna Derevyanko, head of the European Business Association, adds that it’s difficult to make forecasts for the next year now, because there are many factors that can affect the future.
Today Ukraine is gearing up for another full lockdown after the New Year and Christmas holidays, and it may drastically change the situation.
“A lot will depend on how we go through the winter lockdown and what situation we will have in terms of business activity next spring. We remain optimistic, but we look at things realistically and prepare for different scenarios,” Derevyanko said.
According to EBA estimates, it would take from six to 12 months to reach the pre-quarantine level of development of most medium- and large-sized businesses. For small businesses, recovery will take from one to several years.
Successful survivors
All the same, some businesses managed to adapt to the new conditions. One of such spheres is retail.
After the end of full lockdown, retail has started to develop like never before. During the first part of 2020, a total of 340 shops were opened across Ukraine — the biggest number over the last 10 years, according to real estate consulting company NAI Ukraine.
Ukraine’s largest brick and mortar chain of supermarkets, ATB Market, has opened 56 new branches, while the Prostor chain of beauty stores has opened 104 outlets.
According to the report, the growth of retail in Ukraine is connected with the fact the Ukrainians traveled less this year and had money to spend domestically.
Some other companies ensure they stay afloat amid the strict quarantine measures by switching from offline to online. Gyms, for example organized online training for their clients, while many eateries rolled out their deliveries.
There were businesses that saved their revenue by pivoting — starting to produce new for them goods. Kievguma, a company specialized in rubber products, started to produce protective gear for medical workers.
Some companies even used the crisis to start their operations in Ukraine. At the beginning of the pandemic in Ukraine, the officials banned public transport to curb the spread of coronavirus. As a result, the demand for electric scooters and bikes have risen. Almost at once, from August to October, three e-scooter services — Bolt, Kiwi and Scroll — entered Ukraine, in spite of anything.
Now Bolt even wants to expand its network of e-scooters to other Ukrainians cities next year.
