Russia’s war of aggression in Ukraine is a tragic humanitarian crisis affecting millions of men, women and children. The economic impacts of the war have also been severe, with EU trade with Ukraine nosediving due to the war. A recent report from the SME Envoy Network looks at the economic consequences of the war and makes some recommendations on how to help small and medium-sized enterprises (SMEs) emerge stronger from the turmoil.
According to the report, which was put together under the guidance of SME Envoy for Denmark Torsten A. Andersen, the direct economic damage caused by the war will be significant for Europe’s SMEs. European businesses will be more adversely affected by the sanctions put in place as a result of Russia’s unprovoked attack on its neighbour than compared to companies in other large economies. This is due to their higher exposure to the Russian market, which is geographically close and has been a major supplier of energy and other raw materials. Russia has also been an important export market for many European SMEs.
Risk to SMEs
However, the report goes on to say that, the indirect consequences of the war may well prove to be more significant for European SMEs. Ukraine and Russia are key suppliers of a number of commodities that are necessary for a modern economy to function, from wheat to nickel and platinum. In addition, Ukraine also produces around half of the world’s neon, needed in the production of microchips.
The report notes that the impacts of the war may be disproportionately harmful for SMEs, which often lack the resources and global reach to seek out alternative suppliers and diversify their inputs in response to higher prices and longer waiting times. Moreover, as higher costs are passed on throughout value chains, SMEs may find that they have less bargaining power than larger companies do.
Recommendations for recovery
The report recommends that policy-makers should take steps to improve the competitiveness and economic vitality of Europe’s SMEs. New import and export markets should be cultivated for SMEs to offset the loss stemming from the Russian invasion of Ukraine. The report also highlights the important role that trade promotion activities play in supporting, services such as the Enterprise Europe Network.
To help mitigate the negative economic effects of the war, the report stresses that efforts should be made to ensure good economic conditions are conducive to growth within the EU Single Market, so that greater intra-EU trade can provide an alternative for SMEs exporting to the Russian market.
Read the report in full here.
Welcome back to the SME Week Newsletter!
What better time than summer to get creative? The latest edition of SME Week Youth Essay Competition 2021 has been launched to give young people across Europe a platform to share their ideas on what a successful and sustainable start-up in 2030 looks like.
In this edition, we also look at the next phase of the European Enterprise Promotion Awards 2021 to see how many entries made it to the European stage.
Don’t forget to share with us YOUR stories; how are you navigating these challenging times? Share your news and updates to be featured in an upcoming issue or on the Promoting Enterprise News Portal.
Don’t forget to check our YouTube channel below