Circular Flow of Income: Impact on SMEs & UK Government's Role

This essay delves into the circular flow of income and its significance for small and medium enterprises (SMEs). It examines the key internal environmental challenges faced by organizations, particularly SMEs, including difficulties in paying employees, customer retention issues, and the challenges of remote work during the COVID-19 pandemic. The essay also explores strategies for interacting with the external environment, emphasizing the use of social media and improved communication methods. Furthermore, it analyzes the role of the UK government in supporting SMEs during the COVID-19 crisis through financial aid, tax relief, and various support schemes. The report concludes that a healthy circular flow of money is crucial for the survival and prosperity of SMEs and highlights the government's essential role in maintaining stability during challenging times.

Circular Flow of
Income

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY..................................................................................................................................3
1. Examine the key challenges that impacted the internal environment of organisations...........3
2. Strategies of interaction with the external environment..........................................................5
3. Examine the role of the UK government in supporting the SMEs during the Covid-19.........6
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The circular flow of income is very essential for the business organisations. It is an ending
flow of money which helps in the production of goods and services. It helps the small and
medium enterprises in managing the income and expenditures of the economy. The redistribution
of income in any business is very essential. The mainly circular flow of money is between the
land, capital and entrepreneurship (Chowdhury and et.al., 2022). In the following report, the
challenges of the internal environment that would impact the business organisation mainly SMEs
is discussed. Along with it, the strategies that are needed in the external environment during the
covid – 19 is examined. Furthermore, the role of UK government in supporting the SMEs during
the Covid-19 is elaborated.
MAIN BODY
1. Examine the key challenges that impacted the internal environment of organisations.
Internal elements imply anything within the organization and are heavily influenced by the
organization, whether they are unmistakable or irrelevant. These elements, after being sorted out,
are combined into the qualities and weaknesses of the organization. A component is considered
strength if it brings constructive results to the organization.
Then again, if a component is holding back an organization's improvement, it's a disadvantage.
Within an organization, various models should be considered.
The internal climate is where managers organize their way of life, innovation creation,
authority building, and actual office work. The internal climate of the organization is promoting
the power that exists within the actual association and has attributes that can be bound by the
board of directors. In addition, internal climate is an ecological association among typical
associations with direct impact and organizational uniqueness. It is a variety of different types of
assets, capabilities and capabilities that can be used to build market positions. As such, an
internal climate check includes an investigation of an organization's claimed assets, capabilities
and skills (Agyabeng-Mensah and et.al., 2021).
 Unable to pay to their employees: Bosses indicated that the biggest difficulties that
organizations see as similar to those announced by representatives are: emphasizing
actual safety in the work environment, emotional health concerns, and keeping up with
office connections with partners. Organizations also understand that most reps are taking

on more responsibilities than at any time in recent memory, whether through expanded
jobs or additional household debt. The last two years were the downfall that were faced
by the businesses. Many small and medium enterprises were shut down due to the
downfall in the market. Also, the turnover of the business enterprises was reduced and the
circumstances that were faced by the companies were not good. It created a scenario
where the business entities were not being able to pay the salaries to their employees
(Kouhizadeh, Zhu and Sarkis, 2020).
 Customer retention: In recent years, we've seen a real shift in focus on customer
experience. Currently, customers say customer assistance is important to their decision
and steadfastness to their brand. More than half said they wanted a customer assistance
specialist to know their contact details, item purchases and history when contacted.
Recently, customer support was seriously tested with conclusions from actual office
spaces, and this situation led to two major problems. During the lockdown, the main
problem with customer assistance agents has largely been removed, whether that means
working over the phone, talking or emailing. Remote work is the safest option for most
people right now, but one of its downsides is that delegates won't use a similar
framework that they like in the workplace. When the lockdown started, some of them
weren't actually close to a reliable stage to authorize remote work.
 Work from home: All delegates battled through the COVID-19 emergency and reported
various difficulties in their lives, especially with regard to mental and physical health,
expanded fears of responsibility, fears of slowdowns and lack of progress were valuable
open doors, as well as losing the network and having a presence with a partner During the
COVID-19 pandemic in 2020, many workers are expected to telecommute. With this
sudden change comes a test of the blurred line between professional and personal life.
Due to the lack of allocated work space, countless people need to arrange work at will in
the front hall, kitchen, room – wherever there is space. In addition, school closures have
limited many working guardians from trying to be more efficient while managing their
children. Because of these changes, reps of all types are less productive, less inspired,
more stressed, and more unfortunate in their mental health (Leborgne‐Bonassié, Coletti
and Sansone, 2019). One approach that may ultimately be useful for delegates who
address difficulties associated with telecommuting is nursing. Caring can be particularly

beneficial because it helps employees to be intellectually separated from work as needed;
studies people's thoughtfulness about work errands and conducts their presentations in
that way; and allows workers to be more likely to monitor screen weaknesses.
2. Strategies of interaction with the external environment.
External environment helps influence administrative navigation, process and authority
building. The external climate is essential for constant observation and investigation. Examining
the external climate is cumbersome because of its heinous intricacies and intertwining. External
climate is an external force that may actually affect the performance of an association. The
external climate is made up of components outside the association that are beyond the control
and knowledge of the supervisor. This atmosphere influences the supervisor while only making
decisions (Ramos and et.al., 2021). There are two exterior climates such as micro and large
conditions. An external microclimate is a climate that affects the activities of supplier boards,
competitors, members, bank foundations and others. An external climate is one that has no direct
impact, such as financial conditions, innovation changes, government issues, and social affairs.
Use of social media: The organisations and the employees use so much of the social media to
communicate and set a positive mind-set while working.
Ways to improve communication: External areas and ways can be used as a medium for
improving the way one must help in communicating the purpose which a company or individual
wants to serve in limited time period. It can further be helpful to understand which medium
would prove to be useful for attaining better communication technologies. It could be interacting
with people in person or having a conversation over call to understand their perspectives. It helps
to have innovative ideas, understand what is prevailing and existing or taking place in
competitive environment and how in what ways one must overcome issues prevailing in the
economy. It would further help organisation to prepare well in advance what can happen, what
can take place and how in what ways to overcome any situation as well. Social media can prove
to be fruitful and beneficial for a business enterprise and result the company to function in long
run as well (Tseng and et.al., 2021). It would help them to understand and have a preview as
what trends is present and being followed in the environment and in what manner they can place
their products and have a competitive advantage over others. If a person or entity chooses right
path and communication medium they can reach and obtain their goal well in time or before it as
well. It is further important for every business to understand the demand in the marketplace and

for that proper examination of external environment must be done. It would help them to plan
accordingly by having a target market or area already set in mind.
3. Examine the role of the UK government in supporting the SMEs during the Covid-19.
There have been many ways in which the coronavirus has affected the economy and on a
special base it has impacted the Small and medium enterprises on counters of demand as well as
supply. On contrary and on sides of supply businesses have experience a declining scale in case
of supplying labours as workers would be unwell and not healthy which makes them look after
their children or other dependents when schools were closed and movements of people resulted
to be restricted. Measures would be resulting in lock downs which would drop the capacity
utilisation as well. On demand side it has been observed that there has been loss in demand and
income as well for SMEs which would adversely affect the ability to function or cause shortage
in liquidity as well. Support was provided to manage such unpredictable situation by granting
business loans which weren't expected or asked to be repaid, these were designed to compensate
companies which were being forced to close or significantly demanded in adjusting of operations
because of restrictions (Guilhoto, 2021). They supported by providing them relaxation in tax
payment approaches and also there were many schemes launched which rendered support
towards the companies and individuals as well. It consisted of giving wages to people who were
attached with the organisations in such a way that they could manage their living under such
circumstances. It also helped in providing medical facilities to people who were not able to
access them due to insolvency and unavailability of funds with them to pay and have those
facilities. There were times when government managed to bring back people home and back to
their places where they belonged on their own expenses. It managed them to sustain their life on
the cost and expense of government collected funds in the hour of need. There is a big
responsibility being served by UK government during the time of COVID – 19 which also
counts maintaining stability and sustainability in environment. It further counts to give better
opportunities to avail the services such as accessing funds to make products which would
contribute in generating money such as production of vaccines, sanitizers and masks as well. It
also provided free masks, vaccines and many other health related facilities to people having less
money or funds available to prevail such services in the hour of need. It further can be said that
government served and proved to be a helping hand to the country in every case and area be it in

relation to funds for having better health facilities and saving their lives, be it giving them
assistance as what can be done and what safety measures would help them to save themselves
and country too (Schröder and et.al., 2019). It also provided guidelines which were useful for
them to understand what could be done for preventing any unwanted losses and leading to a
situation which would prove to be dangerous for everyone.
CONCLUSION
From the above report, it can be determined that the circular flow of money is very crucial
for every individual as well as for the business entities. If the SMEs have to exists in the
marketplace, then the flow of money should prosper in the company. The above report, consists
of the internal environment challenges that are face by the business in UK during the time frame
of Covid – 19. This incurred as a challenge and is running into the business firm to downfall.
Then further in the report, the discussion about the strategies that re used for moulding the
external environment of the organisation is elaborated. Moreover, the role and importance of UK
government in the business organisation supporting the SMEs of UK during the period of Covid
– 19 is explained.

REFERENCES
Books and Journals
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Practices and Sustainable Performance of Small and Medium-sized Enterprises in
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Agyabeng-Mensah, Y and et.al., 2021. Organisational identity and circular economy: Are inter
and intra organisational learning, lean management and zero waste practices worth
pursuing?. Sustainable Production and Consumption, 28, pp.648-662.
Kouhizadeh, M., Zhu, Q. and Sarkis, J., 2020. Blockchain and the circular economy: potential
tensions and critical reflections from practice. Production Planning & Control, 31(11-
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Leborgne‐Bonassié, M., Coletti, M. and Sansone, G., 2019. What do venture philanthropy
organisations seek in social enterprises?. Business Strategy & Development, 2(4),
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