Businesses are increasingly noticing limitations to their own development

The optimism of entrepreneurs has given way to an adequate assessment of business development opportunities in an overheated economy, as evidenced by measurements of the sentiment of small and large companies. They report a decline in investment activity – the development of companies is hampered by a shortage of personnel, uncertainty in the market and the high cost of debt financing. The most sensitive to deteriorating conditions are manufacturing companies, whose activity was supported by a sharp increase in demand and expanded state support for import substitution.

According to the “Monitoring the State of Business in Russia” (prepared by business ombudsman Boris Titov based on a survey of 5.8 thousand companies), at the end of 2023 adaptation is developing, 19% of enterprises are experiencing serious problems due to sanctions, while almost 60% assess the situation in the economy and in companies as at least satisfactory. However, only 40% of respondents were involved in company development; the rest noted a lack of resources (49%) or business degradation (11%). The main barriers to development in companies are the shortage of personnel (45%), the uncertainty of the economic situation (33%) and state policy in the economy (20%), the high cost of borrowing (32%) and insufficient domestic demand (28%).

The situation, as the survey shows, is better in industry, where 56% of enterprises are engaged in business development. In the wake of import substitution, they managed to replace foreign manufacturers – relying on numerous government support programs. However, it is industry that is more sensitive to new challenges – low availability of loans (the main problem was identified by 45% of industrialists) and personnel shortages (56%). Previously, a noticeable negative correction was demonstrated by the indices of industrial optimism and industrial forecasts of the Gaidar Institute.

In the SME sector, the slowdown in business activity continues. According to PSB Vice President Kirill Tikhonov, the conditions and priorities of business activity are being changed by the tightening of monetary policy: the overall demand for lending is at its lowest since April 2022, when the key rate was in the range of 17–20%. The sales situation is worsening – entrepreneurs began to report a decrease in revenue more often (32%). Sales expectations are also pessimistic: 23% of the company expects revenue growth (minimum in 2023). Lack of access to finance is slowing down investment programs – only 19% of companies increased investments (minimum since February), while 8% (maximum) reduced investments. In the first half of the year, business optimism was explained by expectations of increased consumer activity, but now entrepreneurs are more pragmatic: demand is high, but analysts are expecting it soon cooling down along with the rest of the economy.

Deputy Head of the Ministry of Economy Tatyana Ilyushnikova notes that the demand of SMEs for investment loans remains, but in the second half of the year the department records its decline against the backdrop of an increase in the key rate. In total, in 2023, the volume of financial support, including guarantee and loan programs within the framework of the national SME project, amounted to 1.5 trillion rubles; in 2024, the department plans to maintain these volumes. “This will give businesses the necessary liquidity to continue implementing investment projects,” believes Tatyana Ilyushnikova.

According to RSBI, in 2023, SMEs began to use government support measures noticeably less frequently than in 2021. Experts explain this by the winding down of pandemic support programs that covered most SMEs. For other programs, the state increases the coverage of SMEs with support measures, reducing its average volumes. As reported by the SME Corporation (small business support operator), if in 2022 every 12th entrepreneur used it, then in 2023 – every 17th.

Diana Galieva