Record levels of pessimism among small businesses

Russia’s entrepreneurs are more pessimistic than at any point in the last five years, according to a joint survey by the FOM polling group and the Higher School of Economics. The quarterly study, which has been running for five years, found 52% of individual entrepreneurs and small-business owners believe that conditions for their businesses are deteriorating.

• Just 12% anticipate better circumstances on the horizon. For comparison, in the first quarter of 2022, after the invasion of Ukraine and as sanctions were being rained down on the Russian economy, 38% were pessimistic but at least 20% were optimistic.
• Almost a third (31%) of those surveyed reported closing or selling their business, an eight-percentage-point jump compared to a year ago. Some 39% reported a fall in revenues at the end of Q4 last year and 29% did not have enough to cover even direct expenses. The highest share of companies in five years — 39% — said they were in survival mode.
• The business slowdown is also being seen in a drastic slowdown in store openings across the country. Last year the top 200 FMCG retailers opened just 952 new convenience stores, almost six times fewer than in 2024 (5,660), Kommersant reported. It was the largest annual drop in new openings since figures started being compiled in 2017. Restrictions on alcohol sales in several regions partly explain the decline, with liquor stores seeing the biggest drop-off. But the problem is wider. The payback period for new stores has doubled, from six months to a year. With the current level of rental fees and borrowing costs, opening stores from scratch is unviable. Discounters are generating the bulk of growth in retail space, suggesting that consumers are looking for cheaper options. 

Why the world should care

The challenge faced by small businesses is a good illustration of the overall state of the Russian economy. Entrepreneurs face reduced demand and rising costs. Retailers have stopped opening stores and are switching to a format that caters to struggling consumers. In turn, the state is fighting to collect taxes by putting pressure on business. But the greater the fiscal burden, the faster the tax base shrinks: businesses close down, shift underground or break up. When the oil boom ends it will be clear that the civilian sector, which was supposed to be an alternative revenue stream, will be weaker than it was before the war.

French version edited by Marika Ruggiero, German version edited by Jan Möller