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Impact of sanctions22nd of January 2015
Oleg Popov of Cristanval Cleaning in Russia discusses the impact of economic sanctions there.
In mid-March, after the recognition of the results of the referendum and the decision by Crimea to join the Russian Federation, the United States, the European Union and a number of other countries enacted the first package of economic sanctions, which were then expanded.
Thus far, Russian cleaners haven’t felt any impact from the economic sanctions. We’re witnessing an expansion of retail networks in Moscow and other regions of the country, as well as infrastructure projects.
The market for cleaning continues to grow regardless of economic instability. By the end of the year, it will have grown by 20-30 per cent. And the forecast by market experts is that 2015 will be as strong for the industry. Construction of commercial real estate that was launched before the enactment of sanctions will result in the commissioning of these enterprises.
In a number of cities, the construction of major sports venues and infrastructure is underway for the World Cup in 2018. Any fallout from the economic sanctions on the market is not expected before 2016.
Let’s consider the primary factors affecting the economy in general and the cleaning sector. According to experts, the most negative consequences for our country will be from the limits on the export of Russian high technology and the access of Russian banks to cheap credit.
But the market for cleaning in Russia has no relation to high technologies. And cleaning companies are not dependent on loans, although the rate is on the rise. Companies borrow outside funds for short periods when they’re undergoing rapid growth, but this does not mean they are dependent on loans.
All floor cleaning equipment, implements, detergents and concentrates are manufactured abroad, since the consumption of professional cleaning tools is not yet high enough to make it profitable to open factories here. Prices for all expendable materials are increasing. But these costs amount to no more than 10 per cent of contract value. Also, the warehouses of distributors and large cleaning companies are stocked with everything a company needs at the ‘old’ prices. These supplies are enough even given market growth.
Experts note that the negative outlook of the euro and the dollar against the ruble will be short-lived. In its turn, the low exchange rate may contribute to the establishment of partnerships with new countries. A weaker ruble contributes to the growth of the stabilisation fund. The size of the financial ‘safety cushion’ will help soften the effect of the sanctions in Russia for a couple of years.
It’s the situation with the labour market that has been exerting the greatest impact. There is virtually no unemployment in Russia so no competition in the labour market. Difficulties occur not only as regards line personnel, but also in relation to managers of facilities. It’s not easy finding qualified personnel for new facilities.
And if economic sanctions end up contributing to greater competition for jobs, then our business can only benefit from this.