With the beginning of a full-scale war in Ukraine, a business relocation program began to work, which involves the relocation of enterprises from high-risk areas to safer regions. Such relocation allowed companies to continue working even in difficult conditions, and the recipient regions received additional benefits. Relocated enterprises create new jobs, contribute to the growth of economic activity and increase the amount of tax revenues.
According to the last ones data in Ukraine, 18,944 cases of relocation of enterprises from one region to another due to the war were recorded.
Zakarpattia Oblast became the leader in terms of the number of displaced businesses. By in words deputy head of the regional military administration, Myroslav Biletskyi, thanks to the adoption of displaced enterprises, the region significantly reduced its dependence on state subsidies and demonstrated an example of successful economic adaptation during the war.
Which businesses relocate most actively?
Those with “easy-to-lift” means of production are in demand regardless of geographic location. It is, in particular, about light industry. Many enterprises engaged in textile production, sewing business and shoe manufacturing are moving their facilities to safe regions. They have relatively compact production lines, which at one time allowed them to quickly move equipment to start the production process at a new location. Separate machine-building and metal-processing plants that manufacture machinery, metal structures or components for various industries were also relocated. Since the beginning of the war, such enterprises have been actively looking for safe places to continue their work, because this industry is critically important for supporting the economy and exports.
Food processing, canning, bakery and milk processing facilities were also relocated, as the demand for food products remains high even in difficult conditions.
IT and technology companies can also be included in the easily adaptable industries. Offices working in the field of information technology adapt quite easily to a new environment. Their relocation is often related to the safety of workers, as well as the provision of stable Internet and electricity supply.
Infographic: IA “FACT”
Manufacturers of furniture, building materials made of wood and other products of this industry are also actively moving to the western regions, because their activities are currently in great demand both in the domestic market and for export.
Enterprises engaged in the manufacture of pharmaceutical products, cosmetics, household chemicals or other chemical products are also often relocated, given the high risks of vulnerability of this industry in the frontline regions.
Manufacturers of building materials (concrete, bricks, metal structures) often move to safe regions to continue work, especially given the high demand for infrastructure reconstruction.
In general, the relocation of enterprises covers a wide range of industries, which ensures diverse economic development of the host regions. Access to resources, safe logistics and job preservation are the main drivers for relocation.
Successful cases of relocation
Ukrainian analytical resource Mix.fin.com cites a number of successful examples of the relocation of enterprises within our country.
In 2022, the “Ukrvoyentorg” network, which is engaged in the production and sale of military clothing and equipment, successfully moved its activities from Kramatorsk to Lviv, spending only three weeks on it. During this time, the company organized transportation, conducted a proper audit, and in 14 days created an online store, which allowed the company to quickly resume work at the new location.
The Areal IT company, known for its development and support of the Ukrainian accounting program as an alternative to 1C, was also relocated from Kramatorsk to the western regions of Ukraine. It only took a week to move, adapt the strategy, renew the brand and find new markets.
Viktoriya Karpova, a famous Ukrainian dressmaker and clothing designer who gained popularity thanks to her unique ethnic products, managed to move her sewing company from Pokrovsk to Lviv. At the new location, she quickly started work: she created a new website, set up a wholesale sale of products, agreed with suppliers and made the necessary orders. In addition, she actively recruited personnel to ensure stable operation of the company.
The company “Sem Ekopak”, specializing in the production of packaging products, moved from the Dnipropetrovsk region to the Lviv region. The move was facilitated by the fact that even before the war the company planned to open a branch in the Lviv region and purchased premises in advance. As a result, instead of one planned production line, it was possible to launch three. During the move, 12 wagons and several trucks were used to transport the equipment.
Infographic: AI “FACT” Infographic: IA “FACT”
Business relocation stories are very diverse, because each case has its own unique circumstances. For example, some companies have had to relocate due to staff shortages, as a significant number of employees have moved abroad. Others were forced to relocate due to the destruction of the ways of supplying goods or the presence of restrictions on the market. However, there are also organizations that decided to move not out of necessity, but in order to master new markets, in particular, to start sales in EU countries.
Although officially communities in safer regions were supposed to create favorable conditions for business development, the reality was often different. Several owners of relocated companies pointed to high prices for renting production and warehouse space, as well as insufficient interest on the part of local authorities in attracting new entrepreneurs.
State support for relocation has been suspended
The government created the online resource relocation.gov.ua, which became an important tool for the implementation of the enterprise relocation program in Ukraine. The platform functions as a centralized channel of communication between entrepreneurs and state authorities, which greatly simplifies the process of finding the optimal place to move.
Detailed information about regions accepting relocated enterprises is available on the website. Each region is described in terms of the availability of infrastructure, production facilities, transport routes and resources such as electricity and water supply. This helps companies to choose the optimal place to resume their activities.
Since the beginning of the war, other support programs have been introduced for companies wishing to relocate. In particular, companies could apply through the Prozorro system and use the free transportation services provided by Ukrzaliznytsia and Ukrposhta. In addition, the state offered one-time assistance in the amount of UAH 100,000 for enterprises with up to 12 employees that changed their location. However, today these benefits have been canceled, and businesses are now forced to solve the issue of relocation at their own expense.
Where is the business going?
In 2022, the majority of relocating Ukrainian enterprises chose the western regions of the country, which at that time were the safest due to their relative stability. However, already in 2023, there were changes in relocation trends: businesses began to move from Kyiv to Odesa, and from Dnipropetrovsk region to the capital. In addition, there was a return of enterprises to those regions where the situation improved due to de-occupation or shifting of the front line.
However, despite these changes, many companies have adapted to the new conditions and do not plan to change their location again. One of the reasons for this was the interest of local communities in attracting stable taxpayers and employers. However, there were cases when local authorities not only did not help enterprises to adapt, but also created unfavorable conditions for their development. Overall, the relocation process remains complex and stressful for businesses. However, enterprises whose managers seriously approached planning and organization were able to solve most of the problems at the new location.
