Russia still open for business despite instability

Russia’s attractiveness for global business has taken a huge hit over the past 18 months. Mutual sanctions with EU countries, the USA, Australia and Japan, and a significant drop in oil prices have impacted greatly on the Russian economy. But a TMF Group-commissioned paper reports that business can still be done in Russia, and the majority of Western companies are committed to riding out the storm.

"Business in Russia: The new normals," commissioned by TMF Group and written by Doctor Daniel Thorniley of the CEEMEA Business Group, finds that there are viable scenarios for positive growth opportunity for global companies.

Dr Thorniley forecasts the potential for organic business sales in Russia to increase by as much as 10% if the rouble stabilises or actually appreciates. CEEMEA Business Group member survey results indicate that 46% of consumer product companies are aiming for double-digit sales increases this year, while another 29% aim for high-single digits. Remarkably, pharmaceutical and health companies are budgeting for stronger numbers than in 2014; 60% forecast double-digit sales and another third predict single-digit increases.

TMF Group, a leading provider of global business services with almost a decade of experience in Russia, can attest to the opportunities that have been borne out of the instability in Russia. For example, TMF Group’s HR and Payroll experts point to a trend of “super talents” becoming much more affordable for big companies as the cost of doing business and local labour costs decrease.

Imposed sanctions and the rouble devaluation have resulted in higher overseas material prices for manufacturers, and some companies have decided to invest in local production now, in order to see savings later. This point is further evidenced by TMF Group’s 2015 opening of new offices in Voronezh and Kirov, to support client business and projects.

Alex Medlock, TMF Group Sub-regional Director of CIS and the Nordics said: “While interest from new companies wanting to establish in Russia is less than, say, two years ago, it is still quite healthy and gives us some base for cautious optimism for the remainder of the year.”

Dr Daniel Thorniley said: “The three big influencers of the market remain: the oil price; events in eastern Ukraine; and, related to the previous point, Western sanctions on Russia. When these dynamics go well, the Russian outlook improves – but risks of course, remain high. Executives have undergone several “new normals” over the past 18 months which have changed the market conditions radically. Global headquarters need sensible reassurance about what is going on because Russia remains, for the majority of companies, the number one priority market in the CEE region and an important one in the whole of Europe.”

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