Russian economic meltdown as workers owed £11mn in wages (2025)

Medvedev speaks as Russian employers struggle to pay staff

Russia is facing a deepening economic crisis as employers owe workers almost £11mn in unpaid wages as rising borrowing costs force companies to divert salary funds, according to reports from Russian media. Figures from Rosstat, Russia’s Federal State Statistics Service, show that as of January 1, businesses owed their employees just over £4.9 million (500 million rubles)

By the end of February, that figure is understood to have more than doubled to £11 million (1.2 billion rubles). The worst-hit sectors include construction, where salary delays have increased 13-fold, and civilian electronics manufacturing, where payment delays have tripled. Public utility workers are also facing months-long delays in receiving their wages. Anton Gerashchenko, a former adviser to Ukraine’s Minister of Internal Affairs and a prominent commentator on Russian affairs, highlighted the growing financial strain on ordinary Russians more than three years into the war on Ukraine.

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Russian President Vladimir Putin (Image: Getty)

He pointed to reports from within the country that suggest businesses are struggling under rising credit costs, forcing them to use funds meant for wages to cover other expenses.

He said: "Russian employers owe their employees large amounts of money, and the situation continues to deteriorate. Bank loans are getting more expensive, so companies use money intended for salaries instead of borrowing."

Despite the wage arrears crisis, a separate survey published by Russian state-controlled pollsters claims that 61.3% of Russians are "quite happy" with their earnings.

The starkly contrasting claim has raised questions about the reliability of official sentiment surveys in Russia, where state influence over polling organisations is well-documented.

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The Russian economy has increasingly pivoted towards war production, with heavy state investment flowing into defence industries.

Workers employed in the military-industrial complex tend to receive regular payments, but those in civilian industries have seen a sharp decline in financial stability.

Western sanctions, imposed in response to Russia’s invasion of Ukraine, have placed severe pressure on the country’s financial sector. While Moscow has attempted to mitigate the impact through capital controls and state subsidies, inflation and high interest rates have made borrowing more difficult for businesses.

The Bank of Russia raised interest rates to 16% in December 2023 to curb inflation, which has made credit more expensive and placed further strain on companies struggling to pay wages.

Former Russian President and Deputy Chairman of the Russian Security Council Dmitry Medvedev (Image: Getty)

Mr Gerashchenko suggested that conditions are worsening for those outside the defence sector.

He said: "The Russian economy is becoming increasingly militarised.

"People who work for the military-industrial complex earn good money, but for the rest, the government never really cared about them anyway.”

Mr Geraschenko also shared a clop of former Russian President Dmitry Medvedev talking to crowds in Russia.

He tells them: “There’s just no money right now. We’ll find the money and do the indexing.

“You hang in here, all the best to you, have a nice day, stay strong."