Survey conducted by KPMG in Germany and AHK Ukraine, questioning 142 German companies in Ukraine

Key conditions for expanding business activities are political and economic stability (61% and 51% respectively) as well as the availability of public funding and guarantees (28%).

• Business expectations: 42% of respondents expect the economic situation in Ukraine to improve over the next twelve months; 48% expect no change; 10% expect the situation to deteriorate.
• Intentions regarding investments: 43% of companies are planning new investments in Ukraine; only 8% intend to withdraw investments.
• Opportunities: For 48% of respondents the biggest opportunity is the market access, for 39% the availability of qualified workers and for 36% participation in reconstruction programs to rebuild Ukraine.
• Market entry: More than half of respondents cite access to local business networks (59%) and access to market information (54%) as key business requirements.
• Challenges: For 53%, the ongoing war is the biggest hurdle, for 38% it is security risks for their employees and for 31% it is local corruption. The new mobilization law that has come into force, will limit the availability of labor further.
• Utilizing available funds: Germany and the EU have set up funding programs worth billions of Euros. But 35% of German companies believe that the funds are unsuitable for their purposes; and 20% are yet unaware of these programs.

Ukraine's economy is growing, despite the war with Russia. As per the International Monetary the country's gross domestic product (GDP) dropped by 29% in the first year of the war in 2022 but is expected to grow by 3.2% in the year 2023. Further growth of 6.5% is forecast for 2024. The war economy, i.e. the production of weapons and ammunition, as well as the maintenance and reconstruction of infrastructure destroyed by Russia, will play a major role in this.

The first ‘German-Ukrainian Business Outlook’, a joint business climate survey conducted by KPMG in Germany and the German-Ukrainian Chamber of Industry and Commerce (AHK Ukraine), shows the economic impact this has on German companies. In this survey, 142 companies with existing or planned business activities in Ukraine were questioned.

German companies have a mixed assessment of the current business climate in Ukraine. According to the survey, 24% of respondents rate the current business situation as good, but equally as many rate it as bad; 52% see the situation as neither good nor bad.

However, 42% believe that the business situation will improve in the next twelve months. Only one in ten (10%) anticipate a deterioration. 48% do not expect any significant changes.

‘German investments can contribute significantly to strengthening the Ukrainian economy,’ says Nicolai Kiskalt, Partner and Head of the Country Practice Central Eastern Europe (CEE) at KPMG in Germany. ‘As a large, industrialized nation, Ukraine offers great potential for German companies, particularly in the energy, pharmaceuticals, IT and outsourcing sectors.’

The financing required to maintain and rebuild Ukraine's infrastructure is immense. According to estimates by the World Bank, the costs for this will amount to 486 billion USD¹ within the next decade and will require both public and private funds.

The fact that more than four out of ten German companies surveyed (43%) are planning new investments in Ukraine already in the next twelve months, shows that German companies also want to participate in this task. Only 8% want to withdraw investments.

Almost half of German companies (48%) see access to the Ukrainian market as a business opportunity. ‘Ukraine is one of the largest countries in Europe, has a qualified labor force, and in particular, technical and scientific education has always been good. It also has fertile soil and its location is logistically favorable within Europe. The country is an attractive location for nearshoring,’ explains Reiner Perau, Managing Director of AHK Ukraine.

39% of companies assess the skilled labor force as an opportunity for business.

‘The funding programs of the EU and Germany, as well as other countries and institutions, for Ukraine’s reconstruction open up business opportunities specifically for German companies that are active in the relevant industries,’ says Andreas Glunz, Managing Partner International Business at KPMG in Germany. ‘Key sectors for private investors are energy and public infrastructure in the broadest sense. In addition, there is demand in various industries and in the agricultural sector.’

36% of the companies surveyed already recognize the large potential provided by these funding programs.

More than one in four companies (28%) further cited Ukraine's high level of digitalization, including an excellent digital infrastructure and the large number of IT specialists in the country, as a business opportunity.

For more than half of the German companies surveyed (61% and 51% respectively), political and economic stability are the key requirements for expanding their activities in Ukraine. 28% state that the availability of public funding and guarantees is another important aspect. 

Of the German companies surveyed that want to establish or expand their business in Ukraine, 59% cite strong connections to local companies and networks as the most important factor for success. 54% access to comprehensive and at the same time reliable market information about Ukraine and 37% safe and easier business travel to Ukraine.

‘Despite the ongoing war in Ukraine, the launch of the dedicated Ukraine focus at KPMG in Germany and undertaking the very first ‘German-Ukrainian Business Outlook’ research of willingness of German businesses to invest in Ukraine is a promising sign. This research is crucial for understanding and fostering economic ties between our nations. We, at KPMG in Ukraine, recognize the importance of every effort to rebuild and support Ukraine’s economy, and we are in close collaboration with our colleagues in Germany and AHK Ukraine for their vital contributions’, says Andriy Tsymbal, Managing Partner at KPMG in Ukraine.

For more than half of those surveyed (53%), the ongoing war in Ukraine remains the biggest challenge for long-term, sustainable investments. The focus is particularly on the risks to the safety of their employees (38%). Almost a third of respondents (31%) rate corruption as the third biggest obstacle.

The availability of labor also remains a major challenge during the war (24%). The new mobilization law, which was passed after the end of this survey and which has already come into force, will further limit the availability of labor. ‘The more people that are mobilized, the fewer that will be available to work on the recovery,’ says Reiner Perau.

After the USA, with the EUR 70.4 billion it spent on humanitarian, financial and military aid, Germany is by far the second largest donor country to Ukraine. Having spent EUR 23.1 billion, it is well ahead of the UK (EUR 15.9 billion), Denmark (EUR 8.8 billion), Japan (EUR 7.8 billion) and France at EUR 6.8 billion.²

The extensive funds and guarantees provided by Germany and the EU play an important role in the decision whether to make new investments in Ukraine. However, to date, only a small proportion of respondents (10%) have used these programs. A quarter (26%) plan to do so in the future. However, one in five companies (20%) have never heard of the programs and 35% believe that the programs are unsuitable for their purposes. ‘The relatively low take-up rate and lack of awareness of the existing funding programs underlines the need for more extensive communication about the existing funding opportunities and, if necessary, their adjustment so that they are used by a larger group of companies,’ says Andreas Glunz.

Methodology:

KPMG in Germany and AHK Ukraine surveyed 142 companies with current or future business activities in Ukraine for the ‘German-Ukrainian Business Outlook 2024’ business climate survey. The survey was conducted between the 23 April and 12 May 2024. It focused on the economic outlook of German companies in Ukraine, as well as the challenges they face and their potential future business opportunities.

¹ _{The World Bank (February 2024), Aktualisierte Bewertung des Bedarfs an Sanierung und Wiederaufbau der Ukraine veröffentlicht (worldbank.org)}

² _{IfW Kiel - Ukraine Support Tracker (February 2024), Daten des Ukraine Support Trackers | Kiel Institut (ifw-kiel.de)}

Elisabeth Nechytailo

Advocacy and PR Manager
AHK Ukraine

T +38 044 377 52 00
elisabeth.nechytailo@ukraine.ahk.de

Katrin Häbel

Head of Corporate Communications
KPMG in Germany

T +49 69 9587 4228
khaebel@kpmg.com