The Ukrainian economy risks facing a new wave of production cuts, job losses and declining business activity if restrictions on reserving employees of strategically important enterprises are tightened. According to modeling by Advanter Group, Ukraine's GDP could contract by 0.5% by the end of 2026, while business losses from Russian shelling have already exceeded $10 billion. Against this backdrop, additional staffing restrictions could deepen the economic crisis, UNN writes.
The snowball effect: how cuts to employee reservations threaten the economy
The discussion surrounding the government’s proposed changes to the rules for reserving conscripts has gone far beyond the staffing policies of individual enterprises. Amid the war, constant Russian shelling, a labor shortage and limited access to financing, additional restrictions could affect the economic resilience of the state as a whole.
As UNN was told by Andriy Dlihach, founder of the Advanter Group of companies and the Board community, and co-founder of the Center for Economic Recovery, modeling conducted by analysts indicates that Ukraine’s economy is approaching a critical threshold. According to him, negative trends are already being observed in a number of key sectors, while additional restrictions on businesses could accelerate the economic downturn.
Our modeling shows that Ukraine’s economy is already approaching a critical threshold. According to our estimates, GDP could contract by 0.5% by the end of this year. Business losses from Russian shelling have already exceeded $10 billion
The destruction of production facilities, damage to energy infrastructure and disruptions to logistics are already creating significant financial burdens for businesses. An additional shortage of skilled workers could make restoring damaged enterprises economically impossible.
According to Advanter Group estimates, under current conditions only about 60% of enterprises will be able to recover after Russian strikes. The rest risk facing prolonged downtime or being unable to fully resume operations.
All of this could trigger a snowball effect: worsening business conditions will lead to staff reductions, declining business activity and a further slowdown in the economy
The loss of workers limits enterprises’ production capabilities, leading to reductions in the volume of goods and services. Lower production, in turn, means lower business revenues, resulting in reduced tax receipts and weakened domestic demand.
Such a scenario is particularly dangerous for the economy during wartime, when the state is simultaneously seeking ways to increase defense funding, support critical infrastructure and preserve its own production capacity.
Representatives of 16 analytical centers have already appealed to the President of Ukraine, the Prime Minister, relevant ministries and other government bodies, calling on them to review the government’s proposed changes to the procedure for reserving conscripts.
Which sectors could suffer the most
According to Andriy Dlihach, the labor shortage is already having a negative impact on construction and logistics. At the same time, retail trade, the manufacturing sector and industry have suffered significant losses in recent months.
As for modeling the impact of the proposed changes on various sectors of the economy, construction and logistics are already suffering the most. The defense-industrial complex and the energy sector could also potentially come under additional pressure
For the construction sector, a shortage of workers could mean slower restoration of damaged housing, industrial facilities and infrastructure. For logistics, it could mean more difficult transportation, longer delivery times and additional costs for enterprises that depend on the stable operation of transport companies.
The situation in industry is no less sensitive, as training qualified workers there often requires considerable time. Losing even part of a workforce with specialized expertise could lead to the suspension of individual production processes.
A separate threat is posed by possible restrictions on enterprises in the defense-industrial complex and the energy sector. Their work directly affects the state's defense capability, the stability of energy supplies, and the functioning of other sectors of the economy.
At the same time, negative consequences may also spread to related industries that provide strategic enterprises with components, materials, transportation, repair, and other services. Even if such companies do not directly produce weapons or electricity, their work may be critically necessary for the continuity of the relevant production processes. In addition, they often also carry out government orders.
Moreover, businesses operating abroad that are strategic for the state bring foreign currency into the budget. For example, airlines that, because of the full-scale war, were forced to relocate their operations abroad in order to preserve their fleets and personnel return foreign-currency revenue to Ukraine, which is an additional source of budget income.
According to the Ukrainian Air Transport Association, in 2022–2025, Ukrainian aviation enterprises paid almost UAH 27 billion in taxes and fees. The companies continue to carry out international transportation and specialized aviation operations abroad, ensuring the export of services and foreign-currency revenues for the budget.
Andrii Dlihach reported that Advanter Group was directly involved in developing the concept of economic reservation and the reservation of critical personnel. However, the approach proposed by the government differs from the analysts' recommendations.
Businesses warn of airlines halting operations and defense contracts being disrupted16.10.26, 16:30
Thus, potential economic losses from reducing reservations will not be limited to enterprises whose employees will directly lose their deferments. Due to production and logistics links, the negative effect may spread to entire industries.
Parliament recommended that the government not reduce reservations for the defense-industrial complex and critical infrastructure
The Verkhovna Rada also shares concerns about the possible consequences of the government's initiatives.
As Fedir Venislavskyi, a member of the Verkhovna Rada Committee on National Security, Defense and Intelligence, told UNN, the parliamentary committee has already considered the issue of a possible reduction in the number of reserved employees and recommended that the Cabinet of Ministers refrain from making such decisions concerning the defense-industrial complex and critical infrastructure.
At the committee's extraordinary meeting, which took place exactly one week ago, on Thursday, we expressed our concerns and adopted a decision recommending that the Cabinet of Ministers of Ukraine not reduce the number of reserved employees in these areas
At the same time, the lawmaker emphasized that the final version of the government resolution is not yet available, so it is currently impossible to assess its specific provisions.
According to him, there is indeed a need to streamline the reservation system. The increase in the number of reserved employees is linked both to the growing number of critically important enterprises and to possible abuses.
However, in Venislavskyi's view, addressing this problem should begin with verifying the validity of granting the relevant statuses, analyzing staffing tables, and auditing the existing system, rather than automatically reducing the number of employees necessary for the functioning of strategic enterprises.
Businesses need stable rules, not constant revisions to reservation conditions
The conditions for determining critical status cannot be revised just a month and a half after the previous changes. Businesses need predictability and stable operating rules
Constant changes in regulatory conditions make it more difficult for enterprises to plan their activities over the long term. Companies that enter into contracts, invest in production, and build a personnel reserve need to understand whether they will be able to fulfill their obligations.
Uncertainty about the possibility of retaining key employees creates additional risks for investment, the fulfillment of government orders, and the development of production.
Executive Director of the European Business Association Anna Derevyanko told journalists in a comment that the changes proposed by the government had caused serious concern among both Ukrainian and foreign companies.
The mobilization problem requires a comprehensive solution
Experts and members of parliament interviewed by UNN emphasize that the issue of mobilization cannot be considered separately from the needs of the economy and the country's defense capability.
According to Dligach, instead of creating additional problems for businesses, it is necessary to review approaches to managing human resources in the military, develop recruitment, and seek other ways to replenish personnel.
A separate area should be improving the system for rotating servicemembers and creating conditions for veterans to return to the civilian economy. Veterans themselves could strengthen businesses' operations. This would partially compensate for the staff shortage and allow enterprises to take a more flexible approach to reserving employees from mobilization.
At the same time, according to Andriy Dligach, there is currently practically no systematic return of specialists to civilian employment.
Fedір Venislavskyi also emphasized that the state must use all available mechanisms to meet mobilization needs without creating additional risks for the enterprises on which Ukraine's defense capability depends.
It is important that the government address not only the review of cases in which reservations from mobilization were granted without sufficient grounds, but also all the other components of this problem. This concerns people who evade mobilization, servicemembers who arbitrarily leave their units, as well as possible abuses in obtaining deferments and other similar issues
He emphasized that the parliamentary committee shares the business community's concern about the possible consequences of reducing reservations from mobilization, especially for enterprises in the defense-industrial complex.
Reduction in deferments: government initiative could cost Ukraine dearly20.10.26, 13:17