Kharkiv region is losing industrial enterprises: will the region have an economic future after the war?
During the full-scale war, the economic map of Ukraine underwent significant changes, and this was most noticeable in the Kharkiv region. A powerful industrial region, which traditionally supplied the country with mechanical engineering, electronics, food and construction products, gradually turned into a territory of mass outflow of industrial enterprises. Constant shelling, broken logistics, the threat of occupation and the inability to guarantee the safety of workers forced hundreds of enterprises to take out their equipment, change their registration and save the remnants of production chains in new territories. In the central and western parts of the country, as well as abroad, new nodes of business activity are being formed, while Kharkiv is actually losing its economic center of gravity. After a war, bringing businesses back together can be more difficult than it seems. This requires an answer to the key questions: what is the development perspective of the post-war Kharkiv Oblast? Do the state institutions have a clear strategy for post-war economic recovery, in which the border regions will not remain on the sidelines of development?
Kharkiv during the war: economy, business and survival on the edge of the front
Kharkiv, with its powerful industrial past and outstanding educational and scientific potential, entered the full-scale war as one of the main centers of Ukrainian intellectual and industrial life. On February 24, 2022, Russian troops launched a massive invasion, and Kharkiv Region was one of the first targets. In a matter of hours, a large part of the northern and eastern regions of the region came under occupation, and Kharkiv itself turned into a front-line city that was subjected to daily shelling and airstrikes. However, the regional center stood firm, although large-scale destruction, depopulation, mining, relocation of enterprises and the threat of new attacks directly affected the entire socio-economic landscape of the region.
Kharkiv has always been a powerful player on the economic map of Ukraine. Until 2022, the share of the city in the national GDP reached 3.4%, but in recent years it has significantly decreased. According to the Center for Economic Strategy, Kharkiv Oblast became second after Donetsk Oblast in terms of the scale of direct war losses — 30.2 billion dollars. The city directly estimates its losses at 10 billion dollars.
Despite the devastation, since the beginning of the war, Kharkiv industry held on to those sectors that were involved in military orders, or quickly reoriented to them. In 2023, enterprises of the region sold products worth more than 187 billion hryvnias. For the first half of 2024 — by almost 106 billion hryvnias. The share of the processing industry in the structure is 45%, the extractive industry is 33%, and the rest is the supply of electricity, gas and air conditioning. In the processing industry, 80% of sales were accounted for by the food industry, machine building, motor vehicle production, rubber-plastic and mineral products. In general, about 70 enterprises of the region worked in the field of defense — armored vehicles, repairs, spare parts production.
However, with data, specified in the Program of Economic and Social Development of the Kharkiv Region for 2025, during the war, almost the entire industrial base of the Kharkiv Region suffered from a critical reduction in production. More than 80% of enterprises were forced to suspend work due to shelling, destroyed logistics, lack of funds and lack of safe conditions. The key flagships were affected: JSC “Kharkiv Tractor Plant”, PJSC “Kharkiv Bearing Plant”, SE “Zavod named after V.O. Malysheva”, SE “Kharkiv Armored Plant”, JSC “Ukrainian Energy Machines”, JSC “Kharkiv Machine-Building Plant “Svitlo Shakhtarya”, LLC “Kharkiv Machine-Building Plant “FED”, JSC “KHARTRON”, Kharkiv State Aviation Production Enterprise, State Research and Production Enterprise “Comunar Union”, a branch of the Administration for Gas Processing and Gas Condensate PJSC “Ukrgazvydobuvannya” (Shebelin branch for the processing of gas condensate and oil) and dozens of other enterprises without which it is difficult to imagine the industrial profile of the city.
At the same time, Kharkiv region is considered potentially contaminated with explosive objects, which makes it the most mined region in Europe. The area of the Kharkiv region is approximately 3 million hectares, of which up to 40% were under temporary occupation in 2022. All exempted territories are classified as conditionally contaminated. After the deoccupation in September 2022, about 1 million 256 thousand hectares of the region are considered potentially contaminated with explosive objects – this is 37.2% of the total area of the region. By information Kharkiv Regional Military Administration, as of now, 9,218.16 hectares of 574,000 hectares of agricultural land have been cleared; 1,401.31 kilometers of highways out of 3,040; 214.79 kilometers of railway tracks out of 1230; 353,958 kilometers of gas pipeline networks with 432 and 4,077.54 kilometers of power lines out of a total length of 12,000 kilometers.
Data from Opendatabot are indicative, which show that as of 2024, 990 enterprises have left Kharkiv and the region. In 2025, this trend continues. By volume of business losses, the region took sixth place in Ukraine at that time after Kyiv, Dnipropetrovsk Region, Kyiv Region, Odesa Region and Donetsk Region. But at the same time, Kharkiv Oblast became the fourth region in terms of the number of businesses that moved here: 1,545 companies chose Kharkiv Oblast as their new base. 116 enterprises from de-occupied areas transferred their tax address to Kharkiv, but during the same period 112 enterprises left the city. However, this does not apply to large industrial enterprises, but to medium-sized businesses.
Among all relocated economic entities, 26% are natural persons-entrepreneurs. The vast majority — 90% — left Kharkiv and Kharkiv district, which became the epicenter of the loss of business activity on the map of the region. Instead, only six enterprises returned to Kharkiv region from other, relatively safe regions. Producers of food products, furniture, metal products, textiles, chemicals, wood, and glass dominate the structure of the relocated. Their share is 46.8%. Auto trade and repair — 16.8%, professional, scientific and technical activities — 6.3%, IT and telecom — 4.7%, printing and advertising — 1.4%.
According to the Ministry of Economy and the relocate.prozorro.sale platform, 12,249 business entities from Kharkiv Oblast have used the Business Relocation Program. However, only 127 enterprises (51% of applicants) have fully completed relocation and are operating in new regions. Another 52 enterprises (21%) transferred capacities, but did not resume production. And only 70 companies (28%) completed the relocation without losses. Most often, the new locations were Lviv (21.3%), Zakarpattia (13.7%), Ivano-Frankivsk (12.1%) and Khmelnytskyi regions (9.6%).
Kharkiv Region is besieged by indifference: how the region is losing business, people and the future
According to the statements of government officials, today the Ukrainian state is desperately trying to hold not only the front, but also the rear. However, reality shows that state-owned industrial enterprises and businesses in the front-line regions, in particular in the Kharkiv region, are actually left alone with their problems. Political declarations have nothing to do with the reality under fire. At the same time, there is a critical lack of mechanisms that would allow survival, development and export. Despite numerous high-profile forums, round tables and presentations of new state programs, on which a lot of money is spent, the real situation remains frozen in survival mode.
The Kharkiv region, which holds the economic front almost close to the battle line, found itself in a situation where the main enemies of local business were not only Russian missiles, but also Ukrainian bureaucracy, inertia and demonstrative non-interference. Government programs that are supposed to save, restore and support exist either only on paper or in the form of mechanisms that completely do not correspond to the reality of frontline life. Business in Kharkiv requires support, logic, and access to basic recovery tools.
The main problem that cannot be ignored is mobilization. Those who decided not to leave, who are trying to restore at least part of production, keep foreign contracts, and give jobs to those who have lost their housing and security, remain working in Kharkiv. However, there is no effective tool for booking employees. Enterprises that provide foreign exchange earnings, export products, pay taxes, cannot send a manager to meet with foreign partners, cannot guarantee that the chief engineer will stay in the shop, and not end up in a military unit in a week. At the same time, they do not deny the duty to protect the country, but only ask for a reasonable logic: to enable those who are critical for production to work. However, instead of a politics of priorities, there is a politics of indifference. Someone accidentally falls under the armor, someone does not, even within the same code of the classifier. This is not a mobilization strategy, but chaos that destroys both the defense capability and the economy of the region.
There is another important problem. No country in the world could survive by neglecting its own production at risk. However, this is exactly what is happening with the business support programs promised by the government. The credits of “5-7-9”, which should have been a breath of fresh air, turned into an unattainable promise. The bank does not give loans to the enterprise if its property is located in the shelling zone. At the same time, real estate in Kharkiv, even intact, is not perceived as collateral. To get a loan, you need to have assets in another region, preferably the western one. Most Kharkiv companies do not have such assets, because they never planned to evacuate. As a result, 11.5% of the total volume of loans issued under the program went to regions with a high war risk, that is, those that need them the most received the least.
And here the key could be military insurance – similar to the one that the state organized for grain export and the transport corridor. This is a model that works: the state or international partners compensate for losses in the event of force majeure. Why is it still not widespread in industry? This question remains rhetorical.
No less important, but the problem with grants remains unresolved. The government presented grants for processing enterprises that suffered as a result of hostilities as a major support. If you try the conditions of this program on the front-line territories, you can immediately see that it was created without understanding how business survives in a zone where rockets and shahedis arrive every day, and production areas are literally disappearing. To receive a grant, an entrepreneur must find 20% co-financing. If the state is ready to provide a grant of 10 million hryvnias, then the business must either have 2.5 million hryvnias of its own contribution, or borrow these funds from somewhere. But if the enterprise has lost property, the production base has been destroyed, the equipment has been damaged, there are no assets left in the rear regions, why take a loan? What to go to the bank with? In real conditions, this is almost impossible.
Even the maximum amount of the grant — 16 million hryvnias (about $380,000) — is critically insufficient for a serious restart of the processing enterprise, which must rebuild equipment, logistics, infrastructure and hire staff from scratch. Also, no new funding was allocated to the program itself. As before, it is financed from scattered sources – the general budget basket “Grants for the creation or development of business” (in which only 1.37 billion hryvnias are laid for the whole year), the funds of the Social Insurance Fund in case of unemployment (6.75 billion hryvnias are allocated there), as well as – voluntary donations. These amounts do not stand up to any criticism when compared with the direct damage to the infrastructure in only five eastern regions — Donetsk, Kharkiv, Luhansk, Zaporizhia and Kherson. Losses there are already estimated at $116 billion, that is, two-thirds of all losses in Ukraine.
Therefore, the existing programs are not salvation, but a declarative gesture that allows reporting on “support” of industrial enterprises and business, without changing anything in reality.
Another vital problem is the demining of territories in the Kharkiv region. A business that wants to resume operations, buy land, launch a new facility or industrial cluster must independently initiate demining of the territory. It costs hundreds of thousands, lasts for months, requires permissions from several structures, and the result is not always predictable. At the same time, there is no automated mechanism for quickly clearing territories for economic activity. In the best case, you can try to include the object in the priority list, but the queues for this are gigantic, there are not enough funds, and there are no responsible persons. What works for the agricultural sector, where demining is at least partially financed by state donors, is completely absent in industry. Meanwhile, it is industrial facilities that generate added value, create highly qualified jobs and form the tax base.
Officially, the Kharkiv region is recognized as a front-line region, which should provide for a special legal regime, the possibility of applying preferences, attracting investments, and supporting business. However, this does not happen in reality. Why is the VAT refund delayed for months? Why hasn’t a large-scale program of investment insurance against war risks been launched? Why are demining mechanisms not liberalized? Why is there no real access to funding that is based on the needs of the region and not on one-size-fits-all models? As we can see, these issues and their solution do not bother the government and regional authorities.
Currently, more than 1.2 million people live in Kharkiv, of which more than 200,000 are internally displaced. These are potential employees, entrepreneurs and specialists, but without work they turn into a socially vulnerable group. What is their perspective now and after the war? Where will they work and how will they live?
In December 2024, the Kharkiv Regional Council adopted the Program of Economic and Social Development of the Region for 2025. However, it only describes the problems of the region and defines the following priority tasks for solving problematic issues: support of state-owned industrial enterprises and enterprises of other forms of ownership by conducting constant work with state authorities and local governments to reduce mandatory payments to budgets of various levels; promoting the production of competitive products at the enterprises of the defense-industrial complex of the region; promotion of investment attraction; activation of innovation and investment activities of industrial enterprises; promotion of import substitution of various groups of goods; increasing energy efficiency of production, saving energy resources in conditions of high cost of energy carriers.
As you can see, these are yet another declarative formulation and abstract priorities. Where does it contain specific steps, implementation mechanisms and those responsible for the implementation of measures? Everything is at the level of general phrases and good intentions, which once again remain without results. The local government has no real tools to stimulate the development of industry in the region.
The situation in Kharkiv can be compared with Berlin before 1989 – a center of democracy on the border with “totalitarian Mordor”. This city lives between two worlds next to an enemy country that is constantly shelling it, but at the same time there are people who try to keep a normal life, despite the lack of government support. However, in order for Kharkiv to survive and develop, it is necessary to have a strategic vision of this process and the desire of authorities at all levels to implement it. It is necessary not only to talk about recovery, but to provide the basic tools: capital, guarantees, reservation of workers, tax incentives, access to insurance, etc. After a war, the return of businesses can be more difficult than it seems: destroyed infrastructure, displaced markets, new logistics routes and establishing business in new conditions and other places can shape alternative economic geographies.
The loss of industry and business will be the economic defeat of a powerful region, the loss of people, professions, production traditions and qualified capital. This will devalue the city, which was and should remain the industrial heart of the country. If the state continues to observe this, making only loud statements without real effective steps, Kharkiv Oblast, which until recently formed the strongest economic framework in the east, will turn into a territory of lost prospects.
