There are more than 3,000 kilometers between Kyiv and Barcelona, and the Russian invasion has broken the rhythm of business in both cities. Prices have surged, inflation hit record highs, transport costs climbed, and raw materials became scarcer. The shock of the pandemic may be behind us, but a new crisis has brought war into Europe’s heart. A year on, small and medium-sized enterprises are feeling the impact in very different ways for many, while others are faring somewhat better.
Manel Llaràs, baker: “I’m selling more than ever, but I can’t make it to the end of the month”
Manel Llaràs runs a bakery in a climate of rising costs. When the war in Ukraine intensified in early 2022, he faced a tough choice about whether to lay off staff to balance his accounts. Electricity and flour costs rose sharply, and the conflict added pressure to already stretched finances. He recalls deciding to trim expenses in order to keep the doors open.
Leida, who oversees one of the oldest crafts, manages two bakeries and a team of ten. Since the war began, costs have doubled and today are three times higher than before the conflict. Llaràs managed to avoid a sudden drop in customers by absorbing some increases and avoiding price hikes in the short term. A 12 percent price rise was implemented across two batches last year, but inflation has continued to eat into margins. Bread has risen about 13.5 percent over the last year according to January CPI data, a figure that remains below the broader inflation trend.
Right now, Llaràs is trying to hold prices steady, hoping not to pass further costs to customers. He expects another round of increases this year, around six percent, but he wants to time any changes carefully to avoid hurting clients. Twenty years in the trade has taught him that work and energy costs can spiral quickly. He notes a marked shift in energy use, moving from traditional firewood to gas, which is cleaner and more practical, yet still a major factor in the price surge. He laments that despite paying roughly 200 percent more for electricity than last year, lower prices may not return soon.
Consumption has shown resilience, though economic pressures linger. Llaràs hired staff to replace a fired worker and, despite a strong Christmas, the mathematics don’t always add up. Deferred payments became necessary to keep liquidity, and the outlook for 2023 remains uncertain.
Susanna Visauta, industrialist: “Good prospects, total uncertainty”
Outlook among companies varies by district, with optimism sometimes clashing with caution. Susanna Visauta, managing director of Suinsa, describes cautious excitement about several projects in development and a rebound in high-value manufacturing, including parts for mechanical equipment. Yet rumors from partners and customers cast a shadow, and the year ahead is viewed with careful watchfulness. Suinsa, an SME with around 35 employees, relies heavily on steel imported from Ukraine and on energy supplies that remain volatile. A fixed electricity contract last year helped lock in costs, but renewal terms have changed and monthly bills vary. The price landscape remains unpredictable, and ordering costs can fluctuate between inquiry and delivery, making planning challenging. The sense of uncertainty is constant for those watching the bottom line.
Despite the fog, Suinsa has increased activity. They have begun producing for new clients, including Boeing, with parts for aircraft landing gear, and ophthalmic devices. New orders for blister packs for a major pharmaceutical company signal a broader recovery, but labor costs and materials prices complicate forecasting. Visauta remains optimistic but acknowledges the need for caution, and she notes that a renewed metal supply agreement and tighter labor market could shape outcomes for the year.
Robert Cot, grocer: “The war affected as a pretext: if we wanted to, it wouldn’t have affected us at all”
Robert Cot runs a long-standing grocery in the El Clot area of Barcelona. After a decade of upheaval, he describes a rapid rise in electricity costs, from about 300 euros a month to more than 1,300 euros at the peak, while the price of incoming goods also climbed. The business has remained resilient by focusing on local products and shortening supply chains, yet the pressure remains palpable as transport costs rise and suppliers push for higher prices. Cot argues that the war has been used as a reason for price hikes, even if the core business conditions would otherwise demand different pressures. He notes margins have shrunk as he transitions to longer contracts and uncertain terms, with VAT and broader geopolitical tensions not easing anytime soon. The experience has left him wary about the future, even as orders continue to come in and the store remains a staple in the neighborhood.
In practice, Cot has tried to maintain prices while absorbing some costs himself, but persistent inflation and a tight labor market complicate the goal of staying profitable. He emphasizes that a truly free market requires predictable costs and reliable supply chains, something that has been increasingly difficult in recent years.
Restaurateur Leandro Izquierdo: “I’m full every day and I’ve been losing money for three years”
Leandro Izquierdo runs a busy Madrid restaurant located near Puerta de Alcalá. He describes a pandemic-era shock that kept doors closed and a post-pandemic rebound that still hasn’t translated into stable profits. Electricity bills surged from around 1,600 euros per month in mid-2021 to 5,000 euros in August of the same year, a level he calls unsustainable for a restaurant. While many providers resisted passing along price increases long enough to see if inflation would ease, the months that followed showed there was no easy solution.
Izquierdo lists the biggest cost pressures as fats, sugar, milk, and especially vegetables. While suppliers have sometimes kept prices similar for different food categories, the overall cost trajectory has doubled, underscoring the challenge of maintaining quality while sustaining margins. The only viable response has been to raise menu prices, since cutting staff would compromise service and cutting quality would drive customers away. The lesson is clear: inflation cannot be ignored, but pass-through pricing must be managed carefully to preserve customer trust.
With costs climbing, the path to financial stability remains narrow. Izquierdo emphasizes that service quality must remain high, and staff levels must be maintained to keep customers satisfied. The balance between cost, price, and value continues to test the resilience of this beloved Madrid establishment.