Circular Flow of Income and the Impact of Covid-19 on UK SMEs

This essay discusses the challenges faced by UK SMEs due to the Covid-19 pandemic, including the impact on internal and external factors. It also identifies the role of the UK government in providing support to SMEs during the pandemic. The circular flow of income is explained as a model for the exchange of goods and services in the economy.

Circular flow of income

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Challenges that impacted on internal and external factors of UK SMEs.............................1
Identifying the role of UK government providing support SMEs during the covid 19 pandemic
................................................................................................................................................3
CONCLUSION................................................................................................................................4
REFERENCES ...............................................................................................................................6

INTRODUCTION
The circular flow of income is the process of exchange of economy, goods and services
among the population. The circular flow of income generate the model of the macro-economy
and identifying the national income, outcomes and expenditure created overtime. Coronavirus
pandemic affects the economy in UK most affected SMEs on both supplier and producer. The
effect of Covid-19 on the performance of SMEs across the UK massive. Overall, UK economy
falls down due to the Covid-19 effects and the most effected sectors are agriculture and
construction these sectors causes reduction in revenue. Companies faces decrement in supply of
workforce labour because people was unwell and restricted. UK organization faces sudden loss
of demand and revenue for SMEs most severely affected the productivity and causes the
shortage. Additionally, this essay covers the challenges which affects the internal factors of
SMEs and identifying the role of UK government providing support to small and medium
enterprises during the coronavirus pandemic (McDowell and et. al., 2018).
MAIN BODY
Challenges that impacted on internal and external factors of UK SMEs
During the coronavirus pandemic effected large scale of loss of small and medium
business and the human being suffering all over the UK. It has major impact on public health,
which as also generated large economic crisis in the united Kingdom. Small and medium
business enterprises faces revenue loss due to the highly spread of coronavirus and government
restricted so people do not come outside and this situation more severe drops in capacity
utilisation. Manufacturer faces many difficulties shortage of workforce labour which leads to
shortage of interrupted supply chain. Consumers experiences loss of income and fear of health
treatment which impacts on personal living standard of individual, people reduce consumption
and spending on the goods and services. Tourism and transportation also affected and
contributed to reduction in businesses and consumer confidence. These various impacts was
affecting both small and medium business (Martínez-Román and et. al., 2019).
There are various organization which was permanently closed and faces the loss due to
the closure of market and restriction of government. The major effects of coronavirus pandemic
on people is unemployment. The pandemic has disrupted many business in UK due to partial or
completely lock down. Due to the these effects the supply chain which reduced the production
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and profitability of an organization. It has caused significant changes in the way of individual
behaviour of interacting in the society. Addition, Coronavirus pandemic damage the public
health and also affected the financial health of companies in UK. Among the UK population
people caused by depression due to unemployment. People loss their job because organization
was not able to pay which lead to downfall of overall productivity of an organization. People of
UK faces many challenges such as health issues, lack of economy, unemployment and most of
the business get permanent close (Del Giudice and et. al., 2021).
Small and medium both have negatively impact of Covid 19 pandemic some of them faces huge
loss revenue and some are not able to overcome with the loss. Government imposed the
restriction on people not to go outside which leads to reduction in workforces and product was
not deliver to the customers. SMEs faces most difficulties as compared to the large firm because
it loss the overall productivity but large firm produced the essential products not more but still
continuing in their production during the coronavirus pandemics. Due to government restriction
guidelines people do not come outside their home, many organization innovate the new
technologies and software for interacting on online meeting, information sharing and allow
employees to update and increase their ability which can minimize the covid-19 effects on
business environment (Boakye and et. al., 2021).
Increases sickness is also major challenges for SMEs facing, employee experienced lots
of pressure to work long hours to cover up the organization loss. Small and medium enterprises
play an important role in the economy of UK and impacted by the pandemic crisis. Negative
economic impact of coronavirus pandemic in SMEs of tourism sectors. Some factors that are
influenced by the Covid-19 business, workforce, supply chain and cash flow income of an
organization. This pandemic causes the high unemployment t the new generation, children's are
unable to take opportunities because organization do not hire the employee due to their revenue
loss. Almost 9.2% of enterprises of SMEs was forced to close their activities during the
pandemic. Approx 70-80% terminated and causes serious economic disruption the company.
Nearly 90% of SMEs of food and services reported a reduction in revenue due to the pandemic
crisis. Overall, the UK economy GDP recorded the downturn by 19.8% .Hospitality services
which includes hotels and restaurants had faces many challenges and recorded no outputs of the
organization productivity. But some organization conducted the employee facilities for
communicating and sharing information, employee could works largely form home after some
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relaxation of covid 19 pandemic. This pandemic situation is more acute for the public health of
UK. Business in food services, transportation reported the largest reduction in their potential
growth to produce goods and services due to Coronavirus pandemic crisis. Overall, uncertainty
was down fall in the initial stage of covid-19, such rapid changes in output shows that around
7.6 billion jobs are at risk and most of the people permanently loss their job (Cassetta and et. al.,
2020).These major changes due to pandemic crisis also decreases the employee potential growth
and their abilities.
Identifying the role of UK government providing support SMEs during the covid 19
pandemic
The pandemic causes major effects on economic and social disruption. UK government
provides support to the small and medium firm by reducing the taxes and encouraging an
organization to cope up with revenue loss. Government provides the healthcare services to the
employee to protect from covid-10 viruses. Governments provides the easy loan policies and
low cost credit to business. Hospitality services which had major effect of coronavirus pandemic
government reduces the taxes which helps an orani8zation to overcome with the loss.
Government of UK provided the relaxation which lead to innovation of new technologies and
goods and services to an organization and gain employees can get an opportunities. UK
government made changes to provide the support to small and medium business by which can
give more opportunities to unemployed people. Government agreements to help business to
focus on organization productivity. Government also provides self employment income support
scheme which provides more than half profit to the employees and also gives the health
insurance facilities to every employee of an organization(Cao and Chen, 2018).
Government support and changes can helps organization to gain back its brand image in
the market place. These different changes and schemes may lead to enhancing the potential
growth of an organization. After the coronavirus pandemic crisis organization should also
providing the advance high quality product by which they gain their brand image and customers
back. UK government also introduced new schemes that provides the extended the time period of
business and employee loans and provides funding to local higher authorities in England to
provides support in small and medium business. For the SMEs government provides the extra
supports to the employee such as extra pay amount according to their work hours and leave
facilities which also provides the customers satisfaction (Ardito and et. al., 2021).
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The UK government also generated the small measures to support business which
includes hospitality services. The schemes and plan for the small and medium business
government providing the guidelines for work from homes this provides the continuity in the
production of an organization. These programmes were benefits lots of people and also gets more
opportunities to get back to their jobs. Government reduces the taxes and implemented the
changes after the coronavirus pandemic and organization should again increases the profitability
and the revenue growth of industry. UK industries and business can start to recovery after the
pandemic crisis. Its very difficult for the people to regain their abilities and performance in their
work because of the people do not get the well treatment and get depressed. UK government also
helps to provide the healthcare facilities and establishing the laboratory tests and treatment
facilities to the people was not capable of paying (Santoro and et. al., 2020).
UK government provides the convenient schemes and plan to the local authorities which
helps the people to overcome with the challenges and depression. These strong actions and plan
of government helps organization to increases their profitability and revenue. Industry again
invest more to providing training to employee and new technologies to increases their brand
image among the customers. The schemes was launched after the coronavirus pandemic crisis
and initially government also takes the action against the pandemic situation. With the help of
government UK economy get start recovering and again producing the advance and high quality
products to the customers and at market place. These schemes and plans of UK government are
more effective for the organization and people of England. Government provides the financial
and economic supports to the small and medium enterprises and helps in promoting the brand
image among the customers. Government provided the many facilities to the organization which
can provide relaxation and opportunities to the employees (Denicolai, Zucchella and Magnani,
2021).
CONCLUSION
Form the above studies, it is concluded that circular flow of income generates the model
and structure of economy exchanges of goods and services. UK economy falls down rapildy due
to the coronavirus and people faces many difficulties which includes the health issues,
unemployment and loss their potential abilities. During the covid-19 pandemic most of the
organization get permanently closed and faces many difficulties in coronavirus pandemic crisis.
People faces unemployment because organization was not able to pay to the amount because
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business environment already faces the many challenges which includes reduction in workforce
which results as the supply chain reduction. Due to the huge loss of industries, UK government
provides the support to organization as well as the population of England. For SMEs
organization government make some changes and providing fund to the local authorities for
supporting the small and medium business. UK government imposed the reduction of changes in
tax and revenue which helps industries to regain their brand image and organization provides
high quality of services to the customers.
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REFERENCES
Books and Journals
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orientations in the context of SMEs: Implications for innovation performance. Journal of
Business Research, 123, pp.44-56.
Boakye, D.J., Tingbani, I., Ahinful, G.S. and Nsor-Ambala, R., 2021. The relationship between
environmental management performance and financial performance of firms listed in the
Alternative Investment Market (AIM) in the UK. Journal of Cleaner Production, 278,
p.124034.
Cao, H. and Chen, Z., 2018. The driving effect of internal and external environment on green
innovation strategy-The moderating role of top management’s environmental
awareness. Nankai Business Review International, 10(3), pp.342-361.
Cassetta, E., Monarca, U., Dileo, I., Di Berardino, C. and Pini, M., 2020. The relationship
between digital technologies and internationalisation. Evidence from Italian
SMEs. Industry and Innovation, 27(4), pp.311-339.
Del Giudice, M., Scuotto, V., Papa, A., Tarba, S.Y., Bresciani, S. and Warkentin, M., 2021. A
self‐tuning model for smart manufacturing SMEs: Effects on digital innovation. Journal
of Product Innovation Management, 38(1), pp.68-89.
Denicolai, S., Zucchella, A. and Magnani, G., 2021. Internationalization, digitalization, and
sustainability: Are SMEs ready? A survey on synergies and substituting effects among
growth paths. Technological Forecasting and Social Change, 166, p.120650.
Martínez-Román, J.A., Gamero, J., de Loreto Delgado-González, M. and Tamayo, J.A., 2019.
Innovativeness and internationalization in SMEs: An empirical analysis in European
countries. Technological Forecasting and Social Change, 148, p.119716.
McDowell, W.C., Peake, W.O., Coder, L. and Harris, M.L., 2018. Building small firm
performance through intellectual capital development: Exploring innovation as the “black
box”. Journal of business research, 88, pp.321-327.
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