Contemporary Business Environment: Key Challenges and Strategies for SMEs in UK during Covid-19

This report discusses the impact of Covid-19 on the internal and external environment of business organizations, with a focus on SMEs in the UK. It examines the key challenges faced by SMEs, such as raw material availability, work force availability, funds unavailability, and increased costs. The report also discusses the role of the UK government in supporting SMEs during the pandemic and the strategies adopted by SMEs to interact with the external environment.

1 CIRCULAR FLOW
OF INCOME

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..............................................................................................................................3
TASK 1.......................................................................................................................................3
Key Challenges which affected the internal environment of business organisations ...............3
Examining the role of Uks government for supporting the SMEs in the covid 19 ...................5
Strategies of interaction with the external environment followed by the SMEs of UK.............6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
Term business consists of various aspects internally and externally which might influence
the whole business significantly. The components can neither be outer or inner to business.
Business needs to control these components for reducing, controlling and managing the effect on
the business organizations(Kang, Burdon and Mooney, 2019). Internal components may be
environment of business, governing body, strategies, work force and many more. It is very
simple and easy for the companies for controlling and managing the internal components in
compare to external components. External components may be categorized in
suppliers,economy, government, competitors and many more. Small and mediums sized firms
plays a significant roles in United Kingdoms economy as the number of these SMEs firms is
very high in UK. They contribute a lot in nations economy. But the covid 19 pandemic has great
impact on these business organizations. There are many challenges which impacts the internal
business environment during the pandemic of covid 19. The project consists of different
challenges which were faced by small and medium size firms and strategies of the government of
UK for overcoming the challenges in the last 2 years.
MAIN BODY
TASK 1
Key Challenges which affected the internal environment of business organisations
Pandemic of Covid 19 had great impact on the proper functioning of many of the
business firms globally. In the covid pandemic the businesses had to suffer a lot. The covid
pandemics impacted the economy of the whole nation to a extent that the business's were not
been able to continue further. There were different challenges which impacted the internal
environment of small and medium sized business firms which are explained below-
 Raw material availability- In the covid 19 pandemic it became a major question for the
production business's for maintaining the supply of the raw materials constantly and at
reasonable prices. It disrupted the entire supply chain from starting to end. It become very
hard for the business's for fulfilling the requirements for raw material for manufacturing.
It leaded to the increase in period of operating cycle and the time for waiting of
consumers for goods which have increased. Business organisation suffered as lot of

difficulties in constant availability of raw materials for regularising the manufacturing
as resources from where they may avail materials were closed or ceased. The business's
which needs to import the materials for manufacturing from other nation had to wait for
a long time period as many nations had restricted the import and export activities for
specific goods and services(LIU, LIU and CHEN, 2020). In that condition some of the
firms have closed the manufacturing activities until the situation comes under control.
They had to find out new sources for availing the raw materials for regulating the
production activities. It has increased the cosy of acquisition of raw materials. It has
created a situation for the firms for buying the materials at high cost or wait till the
situation gets normal. So its a no win situation for the business organisations either they
bear the increased cost in acquiring the raw material or close the business operations for a
indefinite time period.
 Work force availability- Human beings were the main victims of the covid 19
pandemic. Covid pandemic has affected greatly on the lives of human being. Large
numbers of people have lost their lives because of the pandemic. In the time of pandemic
the rate of deaths have significantly increased globally. It has impacted the business's in
a negative way for maintaining the workforce in commercial activities. It resulted in
deficiency of the effective workforce for the business firms. Enterprises had to suffer a
lot for availability of effective and skilled human resources which may help them in
continuing the activities of operations. Many firms have to continue the operations with
the shortage of workforce. Related to the workforce there is another problem which had
high impact on economy. Some business firms prefer to cut the head count due the
inability for paying the employee's, workers and labours. Many workers, employees and
labours had lost the jobs in the pandemic. There was a great increase in the rate of
unemployment.
 Funds unavailability- In the pandemic of covid 19 many business organisations were
closed or ceased temporarily or continue the activities at very low level with low finance.
It resulted in lack of funding and shortage in market for fulfilling the requirements of
capital. Since the activities of commercial in the nation have been impacted badly and it
became harder for the firms for generating funds from the business for staying in profit
and sustainable. Due to the funds lacking the business's were not been able to pay the

liabilities and this leaded to increase in rate of defaulters for loan repayment. Due to it the
business's have to lower the scale of business operations. Cash flows is needed for
funding the different activities of business including the payment of raw material
purchase, workers pay, payment of business expenses and many for surviving in the
market. Due to the shortage of funds in market the firms delayed in loan payment which
leads to irregularities in loan payment(Liu, 2021).
 Increased costs- In the covid pandemic one of the major challenge for the firms was for
controlling the cost. Resources cost and materials were greatly increased due to the non
availability and shortage of supply. It resulted in increase in cost of firms and making
them unprofitable and hard in survival. It caused the sustainability and profitability for
log term at stake. The rate of inflation was significantly increased in pandemic as the
business's were unable in managing the cost for staying profitable. Many business's faced
loss in this period about the nations economy.
Examining the role of Uks government for supporting the SMEs in the covid 19
For reducing the impact of Covid 19 pandemic the government of UK played as significant role.
2 schemes were launched for supporting the small and medium firms like Coronavirus Business
Interruption Loan Scheme and the Bounce Bank Loan Scheme. In the 2 schemes the period of
March to August for helping in business capitalization. Funds were given by the Uks government
which is less than earlier period. Small and medium sized firms were demanding the loans for
performing better in covid pandemic.The government gave various job opportunities to the SME
workers in the month of September in 2019. Many businesses like Logistics business, Farm
business and Construction business were very affected and even they made loss in their
operations. More than half of the SME organisations were ready in availing the benefits of the
programs launched by the government(Nikitina and Lapiņa, 2019). These businesses have taken
various benefits like deferred tax payments, protection schemes and sick pay relief. The UK
government has adopted various new technologies and latest software's in order to properly
guide the employee's who are working from home about their tasks and duties. The Employment
Right Act also provided the right to the workers for choosing the place of work and refusing to
the jobs which involve effect of the covid-19 pandemic. All this was done to ensure that all the
people stay in their homes and work from the areas which involves less threat of covid. The main

purpose was to safe the lives of the employee's and the other people of the society. This system
helped the economy in enhancing the productivity and focusing on growth and development of
the nation. These new schemes were prepared to reduce the financial burden on the
organisation's. The various opportunities which were given to the SME businesses are as
follows:
 Providing the benefit of work from home to the workers
 Reduce the working hours of the employee's
 To close the businesses for a short period of time
 The working was divided in two shifts to reduce the work pressure
The schemes which were launched by the government of UK for preventing the effect of
the pandemic and helping the businesses to some extent are discussed below:
 Deferring Self-Assessment Payments: All the tax payers of the country were provided
an option to pay the tax until June 2020. An online facility for payment of tax was started
by the government to reduce the complexities. The tax payers were given benefit of
taking a Vat holiday(Suszyński, 2020).
 Coronavirus Business Interruption loan: The UK government provided loans to those
SMEs which have an annual turnover of less than £45 with a view to help the businesses
in surviving for a long period of time in the market.
 Take advantage of HMRC time to pay tax: The SMEs were given an option to pay
the tax at a later time. This was by keeping in mind the current situation of the country
due to the pandemic.
Granting Fund: Grant of £1000 was given to those SMEs which have property value
less than £15000. SMEs have availed this advantage as a rural rate relief which involves
occupying a building for business.
Strategies of interaction with the external environment followed by the SMEs of UK
In the covid pandemic, the SME were focusing on the external threats and opportunities
to maintain the survival of their business. The pandemic created various problems for the SMEs
which include constant disruptions and raising concerns in the working of the small

businesses(Hawas, 2019). The policies made by the organisations to overcome these issues are
discussed below:
Technological Advances- The companies adopted various technologies for managing
the work properly. It reduces the cost of human resources and also help the business in
reducing the problem solving time. Due to the scarcity of capital, the organisations
shifted their work to homes which reduces the overall fixed cost and helps company to
remain at break even point(Taylor, 2022).
Customer expectations- All the businesses focused on providing good quality products
to the customers at an affordable price.
Supplier Requirements- The needs and requirements of the suppliers was properly
analysed by the business in order to manage the inventory system.
Regulatory Changes- Every company adopted the changes which were introduced by
the government due to covid. This will help the business in surviving for a long term of
time.
Economic factors- The organisations should try to retain the existing employee's in
order to give them support in the current situation.
Global factors- The business should focus on its issues so that it can formulate effective policies
in order to keep a check on its activities. There are various elements and factors which needs to
be considered for running the operations of the business effectively and efficiently(Belyaeva,
2018).
CONCLUSION
From the above report, it can be concluded that business is influenced by various factors.
These elements can be divided in two categories i.e. internal and external. The organisations
need to pay attention on both these elements for running the business smoothly. It affects the
overall working and also reduces the performance of the company. The objectives and targets are
also not fulfilled by these hindrances. The economic structure of UK is significantly affected by
the covid-19 pandemic. Earlier, the small businesses were contributing in the growth and
development of the economy. But because of the pandemic, all the business have suffered heavy
losses which has reduced their contribution. The organisation's are not able to survive and sustain
in the market due to the new restrictions and regulations. The role of government is increased in

the current situation. They should frame various policies and provide financial assistance to the
small and medium-sized enterprises which help them to overcome the issues caused by the
Covid-19. This will be very beneficial for the revival and development of the economy of UK.

REFERENCES
Books and Journals
Belyaeva, Z., 2018. Business environment challenges and trends for contemporary SMEs in
Europe. The sustainable marketing concept in European SMEs.
Hawas, A.T., 2019. The Impact of Changes in the Contemporary Business Environment on
Management Accounting. Al-Rafidain University College For Sciences, (44).
Kang, K., Burdon, S. and Mooney, G., 2019. Innovation Cultural Factors in Australian Business
Environment: IT Organizations in Australia. In Handbook of Research on
Contemporary Approaches in Management and Organizational Strategy (pp. 129-145).
IGI Global.
LIU, H., LIU, Y.W. and CHEN, Z.W., 2020. FDI, Business Environment and Quality Upgrading
of Export products. Contemporary Finance & Economics, (11), p.100.
Liu, Y., 2021. Business Environment Construction and Its Prospects in China’s Logistics
Industry. In Contemporary Logistics in China (pp. 199-222). Springer, Singapore.
Nikitina, T. and Lapiņa, I., 2019. Creating and managing knowledge towards managerial
competence development in contemporary business environment. Knowledge
Management Research & Practice, 17(1), pp.96-107.
Suszyński, C., 2020. Revolutionary context of the evolution of a business enterprise.
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Taylor, A., 2022. Contemporary HRM Practices in Japanese Small Business. In Small Business
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