Kharkiv, once an IT hub for Ukraine, now struggles to provide services after workers fled war

One Friday evening, in the western Ukrainian city of Lviv, there's a saxophonist crooning on the cobblestone street corner, families go out to dinner. Teenagers laugh in the streets with their friends, and in the main square more than a dozen people gather around a guitarist and dance as fluffy snowflakes fall to the ground.

This city, though it is under constant threat of Russian missile attacks, has become a refuge for many Ukrainians fleeing the fighting dominating the east and south and looking for some semblance of normalcy.According to the Lviv Regional State Administration, theregion iscurrently hostingaround 250,000 refugeesfrom other parts of the country.

The unfortunate side effect being that the cities and towns they've left behind are struggling to maintain services.

Vitalii Kucherov has a promising career as a computer software engineer.

When the Russian onslaught began last year in his home city of Kharkiv in the northeast, it wasn't fear that propelled the man in his early 20s to move his life, but the fact that his friends were leaving. He already worked remotely, so it was an easy decision.

'I don't want to go back'

He had a dream of one day opening an amateur photo lab in Kharkiv, turning his passion for photography into something bigger around which he could build a community. After relocating to Lviv, he and a few friends turned that dream into a reality and opened a new business in the city's old town.

He emerges from the darkroom they've built in a converted apartment where he's been working with a new member to rectify some issues she's having with spots on her prints.

"So basically, this is our place," he said. "It contains our lab, also we have this studio where you can use our equipment, studio lights, video lights."

The lab, called Berliner Strasse, has gained attention quickly, he says, showing the facility's calendar, booked nearly constantly. Even amid the upheaval of the war, thecommunity he envisioned is coming together.

"Yeah, I don't want to go back," said Kucherov, who continues to work remotely as a software engineer.

"I was in Kharkiv, but there's no reason for me to come back because most of my friends are also here and I really like this city. And I don't want to leave because of the lab. It's usually like my second home."

Kucherov is far from alone. Tens of thousands of people worked in information and technology services in Kharkiv before the invasion, according to industry records. The city, home to nearly 1.5 million people before the war, is estimated to have halved in size.

Because IT is already a highly mobile industry, workers were easily able to flee the violence while also maintaining their careers and providing for their families. But this kind of exodus has repercussions for the cities left behind.

"Mainly all companies relocated part of their teams not everybody but partly to different cities of Ukraine and outside of Ukraine," said Olga Shapoval, executive director of the industry group the Kharkiv IT Cluster.

She, too, was among those who fled the city when residents were enduring round-the-clock shelling by Russian forces.

"Part of our team is in Kharkiv, partly we are all over Ukraine and all over the world," she said.

For those who stayed, path forward uncertain

When the Russian soldiers first crossed Ukraine's border last year, Oleksandr Kolb remembers vividly the panic of rushing not away from the danger, but toward it back to his home in Kharkiv.

At the time, he was in Kyiv on a business trip and he needed to not only get back to his family, but also to his workers. As the CEO of his own company called Promodo, which provides digital marketing solutions, he felt responsible to keep his workers safe, too.

First, he says, they set up a new office, where employees who didn't want to leave Kharkiv could live and stay with their families. They could cook and sleep there, and there was a bomb shelter beneath the new makeshift dorm. Only about 20 employees took Kolb up on the offer, but they lived, worked and volunteered to support the army together in that space in those early weeks.

"I love Kharkiv. I wasn't born here, but this is my home," Kolb said. "So, I decided to stay and help."

The security situation improved in Kharkiv after a Ukrainian army push in the northeast last summer and fall. The city is still regularly targeted by Russian missile attacks, but more employees have returned.

Of 350 total employees, about 80 are currently living and working in Kharkiv, Kolb says, down from 240 before the invasion. He says far more of his employees have decided to move to Kyiv now, with employees there outnumbering those who stayed in Kharkiv. And he's not sure if they'll come back.

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"We even opened a new office [in Kyiv], because in the periods when we don't have electricity, a lot of people need to come into an office because it's the only way to work and to keep connections to the clients," he said.

He says it's primarily young people who want to stay in western cities. First because many of them didn't own property in the east, so it's easier to leave. But the other factor is that primary and secondary schools haven't yet reopened in Kharkiv, making Kyiv or Lviv better options for young families.

Kolb says he's already been forced to relocate some core parts of his business to Kyiv. He hopes he'll be able to keep the head office in Kharkiv, but says for now it's too difficult to know if that's possible.

"I hope that people will come back," Kolb said. "As soon as the war is finished."

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Kharkiv a pillar of tech industry

On a national scale, the IT sector has held a special place in the Ukrainian economy since the invasion, a lonely bright spot that's continued to grow in 2022 according to the national body, IT Ukraine Association.

According to their statistics, which are generated from the reports of the National Bank of Ukraine, the industry was valued at $7.34 billion US last year, with exported services growing nearly six per cent from 2021.

"Our companies are successfully overcoming all the obstacles, including blackouts and significant interruptions in communication, so they are able to ensure the growth of the industry, albeit at a slower pace," said Konstantin Vasyuk, executive director of the IT Ukraine Association.

Kharkiv has long been a pillar of the national industry and is estimated to be home to 16 per cent of Ukraine's IT workers before the war, second only to Kyiv, Shapoval says.

"As for our research, 95 per cent of our members restored their business and many started to grow and hire new people," she said in a Zoom interview.

But even if those businesses are doing well and their growth is helping national coffers, in many instances that success won't translate back to the cities they once called home.

Kharkiv's economy is struggling, with the municipal government having received more than 200 applications from a broad range of local businesses to relocate elsewhere in the country since the war began. This does not account for businesses that have closed altogether.

Loss of tax revenue

This loss of tax revenue comes at a time of an extraordinary increase in demand for municipal services, as repairs to the city have been costly and in many cases, repairs to homes are being stick-handled by the municipal government.

Shapoval said that many businesses from the IT sector are continuing to support the City of Kharkiv and the community more generally through different aid and development projects, such as providing additional financial assistance directly to the municipality, buying ambulances for the local military battalion and helping to fund evacuation efforts.

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She is confident that even though the security threat has hobbled her home city, businesses will return when it's safe, noting that according to the IT Cluster's report, many companies that left Kharkiv say they plan to return after the war.

Beyond that, Shapoval says even those who don't know if they will return still invest money and time to help.

"So I think that we will survive thanks to such volunteering and support."

Though rebuilding and attracting residents has become a challenge that only grows more acute as the war drags on, Kharkiv's mayor, Ihor Terekhov, refuses to be deterred from that goal.

Last fall, he announced that the municipal government had no plans to cancel any of the capital projects planned before the invasion, despite the drop in tax revenues.

Between pledges from different governments and investment banks, Terekhov said the difference will be made up and the city will plan for the return of its residents.

"The European Investment Bank has confirmed that all projects, including the construction of a new metro line, the construction of a depot, the purchase of new rolling stock for the metro, the purchase of new trolley buses and trams, and traffic safety," he said. "We are absolutely continuing everything."