Russian economy meltdown as 1,200 foreign companies flee in '£100bn blow'

Some firms have left Russia while others have elected to maintain a presence (Image: Getty)

An exodus of foreign companies from Russia has resulted in a £100billion blow to the country's economy, research has found.

The loss of cash is said to have occurred since Vladimir Putin's full-scale invasion of Ukraine in February 2022.

The Center for European Policy Analysis (CEPA) has said that the departure, or suspension of business activity, of more than 1,200 firms from other countires has reduced the options available to Russian consumers and is damaging its image.

It adds that current growth is "heavily tied to military spending", and investments are "tilted toward war-related industries, import substitution, and infrastructure projects to facilitate trade with China".

This means, without defence spending, Russia’s economy would "likely stagnate".

The conflict in Ukraine is nearly three years old (Image: Getty)

Findings also read: "Wartime production and import substitution have combined with a shrinking workforce to overheat the economy, with rising wages and reduced civilian capacity producing virtually uncontrollable consumer-price inflation, despite record-high interest rates.

"All of these factors exacerbate mid- and long-term risks, stemming from unsustainable growth, technological backwardness, and labor-force depletion."

If the conflict were to cease, and even if it continues, experts add that Russia’s dependence on military spending, low-tech exports, and high inflation "may lead to economic stagnation of the kind seen in the Soviet Union in the 1980s".

The Kyiv School of Economics (KSE) states that, over the two years since the full-scale invasion, Russia has lost $125billion (£99.2billion) in revenue from Western companies.

Putin has been hit with western economic sanctions (Image: Getty)

This is the equivalent of about 5.6% of the state's GDP.

The total revenue of foreign companies in Russia, meanwhile, is reported to have fallen from $318billion (£252.4billion) in 2021 to $193billion (£153.2billion) in 2023.

Although, experts at the KSE also conclude that, despite substantial reduction in revenue, many foreign companies continue to earn profits in Russi.

It adds: "Further exit of foreign businesses from Russia is possible only through the intensification of sectoral sanctions and increased pressure from governments and the international community.

"As of September 2024, a total of 2,155 international companies continue to operate in Russia. 1,358 businesses are reducing their operations, while 423 have fully completed their exit from the country."