Researching the Economic Effects of COVID-19 on SMEs in the UK Economy

This research project investigates the economic effects of the COVID-19 pandemic on Small and Medium Enterprises (SMEs) in the UK. It begins by outlining the background and rationale for the research, emphasizing the significant role SMEs play in the UK economy and the severe impact of COVID-19 on various sectors. The study aims to explore the responses of SMEs to the disruptions caused by the pandemic, focusing on positive recovery strategies, business decision-making processes, challenges, and opportunities. The literature review examines existing research on these topics, including the effectiveness of UK National Schemes and policy interventions. The methodology section details the research philosophy, approach, strategy, and data collection methods used. The findings and conclusion highlight the key insights gained from the research, offering recommendations for SMEs and policymakers. Ultimately, the report seeks to provide a comprehensive understanding of how SMEs have navigated the economic challenges posed by COVID-19 and the support mechanisms available to them.

Research project on
entrepreneurship

Table of Contents
INTRODUCTION...........................................................................................................................4
Background of Research.........................................................................................................4
Rationale of Research.............................................................................................................4
Research Aim.........................................................................................................................4
Research Objectives...............................................................................................................4
Research Questions................................................................................................................5
LITERATURE REVIEW................................................................................................................6
Positive responses for SMEs in order to recover from COVID-19........................................6
Business decision-making that SMEs are undertaking during COVID-19 disruption...........6
Major challenges and opportunities being faced by SMEs in the UK...................................7
Treats from external environment and potential opportunities for SMEs during COVID-19
disruption................................................................................................................................7
Effectiveness of UK National Schemes and policy interventions to support SMEs during
COVID-19 disruption.............................................................................................................8
Literature gap..........................................................................................................................8
METHODOLOGY..........................................................................................................................9
Research philosophy...............................................................................................................9
Research Approach.................................................................................................................9
Research strategy..................................................................................................................10
Research choices..................................................................................................................10
Data collection method.........................................................................................................10
Time horizon........................................................................................................................10
RESEARCH AND FINDINGS.....................................................................................................12
CONCLUSION..............................................................................................................................17
RECOMMENDATIONS...............................................................................................................17
REFERENCES..............................................................................................................................18

Title: Investigate the economic effects of COVID – 19 on SMEs in the UK
INTRODUCTION
Background of Research
COVID-19 pandemic is causing the large scale life loss and also severe human sufferings
at global level. This is one of the big public health crisis in the living memory that has generated
main economic crisis. Small and medium size organisations are lifeblood of UK economy. They
are worried regarding weak economy of country. SMEs account for the 50% of total generated
through business of UK and 44% of labour force of country. With COVID-19causing crisis
which impact livelihood and lives (Albonico, Mladenov and Sharma, 2020). There are many
sectors impacted negatively such as construction, agriculture and logistics, while least impacted
SMEs are finance insurance and education sectors. Bleak expectations of UK economy and
negative trends in revenue of SME paint worrisome image. COVID-19 and economic volatility
has significant impact on the SMEs across UK.
Rationale of Research
The present investigation is related to response of the SMEs to the disruption of SMEs.
This research helps a learner to provide the understanding regarding the small scale business and
the COVID-19 disruption. COVID-19 develops the negative impact on the small business firms.
The research is mainly conducted in the personal and professional context. In personal context,
knowledge and understanding of a learner regarding COVID-19 will be enhanced. Other than
this, in professional context, researcher skills of learner will be enhanced so that it can able to
perform the investigation in future (Alonso and et. al., 2020).
Research Aim
The aim of this research is “To Investigate the response of SMEs to COVID-19
disruption.”
Research Objectives
 To identify the positive responses for SMEs in order to recover from COVID-19.
 To highlight the business decision-making that SMEs are undertaking during COVID-19
disruption
 To identify the major challenges and opportunities being faced by SMEs in the UK.
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 To analyse the threats from external environment and potential opportunities for SMEs
during COVID-19 disruption.
 To analyse the effectiveness of UK National Schemes and policy interventions to support
SMEs during COVID-19 disruption.
Research Questions
 How did the SMEs respond to recover from COVID-19 disruption?
 What business decisions were undertaking from SMEs during COVID-19 disruption?
 What challenges and opportunities were faced by SMEs?
 Which is the threats and opportunities for SMEs during COVID-19 disruption?
 How UK National Schemes and policy intervention support SMEs during COVID-19
disruption?
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LITERATURE REVIEW
Literature review is mainly discussing as well as analyse the published information
regarding specific subject area. Main focus of academic paper is to support own argument. Main
focus of literature review is to summarise argument of others. For collection of information in
literature review, there has been secondary method of data collection. The secondary sources
consist books, journals, internet sources and others. Literature review helps in attaining the
objectives within given time period (Banna and et. al., 2020).
Positive responses for SMEs in order to recover from COVID-19
According to opinion of C. Richard Neu, Diana Gehlhaus, Howard J. Shatz (2021) Positive
responses of SMEs during the COVID is that the company experienced the low supply of the
labours as they have to look after their families during this situation and Providing them the basic
needs. SMEs are dealing with the few customers only by which the risk will be reduce during
this pandemic period. SMEs have earned more money basically the shop and the medical stores
have the positive responses as because the customers start using the things which are necessity
during this period which helps in generating the revenue of these small stores and shops (Danielli
and et. al., 2020). SMEs share the information with the customers so that the trust between them
is built and helps in making a good and long term relationships in the future also. The things
which are in need of the people have charged the high prices of that product and the individuals
have to purchase these products at that price only. SMEs supply the things to the customer in a
proper manner when they are in need of it so that they have not too worried about the goods and
should supply the goods properly to them during this pandemic situation.
Business decision-making that SMEs are undertaking during COVID-19 disruption
As per opinion of Adrian HauserFabian Eggers and Stefan Güldenberg (2021) The SMEs
have to take the decision in a proper manner and the decision are to be taken quickly during this
pandemic. By making the decision smartly and quickly we can face the future circumstances and
handle them in a proper manner. The information is to be transmitted properly so that in future
no worst situation will arise. Decision makers should take the decisions at various levels so that
in future there will be no issue. These enterprises have to take the decision carefully and helps
these and small medium shops to grow properly in an organisation. Decision making regarding
the prices should be taken so that the people can easily purchase the things and should provide
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the goods in the bulk so that they can save in the future and do not waste them. These decisions
help the enterprises to handle the customer and make sure that the customers are comfortable
with the decisions taken by the enterprises during this situation and helps in the growth so that
the company can earn the revenue and profit in the future and have the good relationship with the
customers (Fabeil, Pazi and Langgat, 2020). The decision regarding the business is to be taken
on the timely basis before the situation get worst.
Major challenges and opportunities being faced by SMEs in the UK
On the basis of viewpoint Simon Willmett (2021) Major challenges and the opportunities
are to attract the new customer by providing them the services in the proper manner and make
them attract with their brand name as it helps in building the trust and helps in maintaining the
good relationship. The profitability of the company will increase by reducing the cost, increasing
the turnover and the efficiency. Using the latest technology helps in increasing the customer
loyalty and the attractiveness so that they can purchase the goods or the products from that
company only. By using the new technologies, the customers get attracted and these helps in
building the future relationship so that the customers will purchase from them only. Social
medial is also a good opportunity for the companies as the customers can easily purchase the
goods online and there are varieties of goods available with their full information by which the
people get attracted easily and can earn the revenues and the profit and the company growth will
also increase in the future also. It is the most powerful tool the enterprises can used to attract the
customers and can maximize the brand image of a company. The priority of every enterprises is
to build the brand image because of that only the customers will increase and the profit can be
earned.
Treats from external environment and potential opportunities for SMEs during COVID-19
disruption
As per opinion of Heather C Banham (2021) Various external environment and the
opportunities of SMEs during the COVID situation is the Technological advances as the
enterprises are not able to afford these technologies during the COVID situation as their no flow
of money in the economy and these enterprises would not be able to afford these so the decisions
are to be taken care in the proper manner. Customer expectations is also the threat during the
pandemic situation because there is no flow of money in an economy so the customers want the
less price of the basic products so that they can easily purchase them. Suppliers requirement
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during the COVID situation is less as there are no suppliers for the products by which the goods
are less and demand of the people during this situation is very high. There is also change in the
government regulation as the decisions are changing during the pandemic on the regular basis so
the customers are worried about the prices and the goods (Jeris and Nath, 2020). As there is also
increase bin the competition in the markets because the product sold are very less and some
enterprises charge the high price of the products by which the customer interest is easily shift to
another enterprise.
Effectiveness of UK National Schemes and policy interventions to support SMEs during
COVID-19 disruption
Charles Goodhart, Dimitri Tsomocos, Xuan Wang (2020) stated that Government of
United Kingdom has announced series of the measures in order to support public services,
businesses and people by period of serious disruption caused through COVID-19. Government
mainly measures are mixture of financing relief and also support cost of staff members. Clarity
on plans as well as practical processes in order to taking benefit of support is mainly expected to
provide as day progress. Coronavirus outbreak is causing global health emergency and economic
slowdown at global level (Papadopoulos, Baltas and Balta, 2020). Growth, trade, employment
and investment are mainly impacted and it also develop the negative impact on attaining the
sustainable development goals. Combination of Coronavirus pandemic and policy measures
regarding lockdown and introduced quarantine in response that has drastic impact on cash flows
and businesses solvency in countries impacted. Gibson Dunn Coronavirus (COVID-19) resource
centre for the details on government schemes of United Kingdom consisting COVID-19
Corporate Finance Facility and also Coronavirus Business Interruption Loans, Coronavirus Job
Retention Scheme and some other UK employment related-matters and COVID-19 Corporate
Financing Facility (CCFF).
Literature gap
A research gap also known as a gap in literature, is subject or topic that has not been
effectively explored or solved in the literature. A research gap ensures the sustainability of your
study by alerting the reader and many others in the area to a point in the study that requires
attention. In the literature review studied about the Positive responses for SMEs in order to
recover from COVID-19. There has been also determined about the treats from external
environment and potential opportunities for SMEs during COVID-19 disruption. Literature
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review bridges the gap by determining the negative consequences of the COVID-19 on small
scale businesses. There has been also determined the internal issues which faced through the
company during COVID-19 pandemic. Company can conduct the internal analysis to identify
weakness of company and convert them into strengths.
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METHODOLOGY
Research methodology is careful consideration of study related to specific concern or issue
using the scientific methods. Research is systemic inquiry to explain, discuss, predict and control
observed phenomena. It clarifies research inquiry about collection of data and analyse this. This
is mainly clarifies starting stage of an investigation, bearing of research and conceivable
ramifications of an investigation. Research onion has been taken into consideration in research
methodology. It was developed through Saunders et. al., 2007 and consisting different layers.
Various layers included in research onion mention below:
Research philosophy
It is outer layer of research onion framework for conducting an investigation. Research
onion is related to set of beliefs concerned to reality nature that is being investigated. There are
positivism and interpretivism are two different philosophies of research. The positivism
philosophy come with the research questions which require to be examined (Rowan and
Galanakis, 2020). The interpretivism research philosophy provides the detailed explanation
regarding particular area.
Justification: In conducting the present investigation, there has been interpretivism
research philosophy used. It provides the detailed understanding regarding the particular subject
area.
Research Approach
It is concerned regarding plan and procedure that span steps from wider assumption to the
data collection method in detailed manner. It is systematic approach in order to obtaining the
new as well as reliable knowledge. Inductive research approach permits to develop theory than
adopt pre-existing one. There is not any framework that informs initially data collection and
research focus can be formed. Other than this, deductive approach is related to develop
hypothesis on pre-existing theory. In this approach, knowledge and general theory is established
first and particular knowledge gain from research process is tested (Singh and et. al., 2020).
Justification: Inductive research approach has been considered because it is characterised
as move from particular to general. It is mainly used for the qualitative research method. This is
mainly used with the interpretivism research philosophy where data and information is analysed
and patterns used to inform result generalisation.
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Research strategy
Research strategy is mainly discussing how an investigator mainly intends to carried out
research work. Strategy mainly consists various approached for an instance action research,
interviews, experimental, systematic literature review and others (Kraus and et. al., 2020).
Justification: There has been systematic literature review considered as the effective
research strategy. This strategy takes the existing literature and also synthesise this either
qualitative. It provides the in- depth and detailed understanding regarding the investigate the
response of SMEs to COVID-19 disruption (Torfs, 2020).
Research choices
This layer of research onion aids to know whether this is effective to combine the
qualitative and quantitative methodology or use only single methodology. There are three
different outlined choices in research onion that consists mono, mixed and multi method choice.
Justification: Qualitative research method used as this it is considered as the mono method. This
is mainly consists gathering and examining the non- numerical data. It can be used to collect the
detailed as well as in- depth insights into issues (Rowan and Galanakis, 2020).
Data collection method
This layer of research onion includes procedure and techniques. It is mainly used to define
ways as well as purpose of research being conducted. Primary and secondary are two different
methods of data collection. The primary method provides the new and fresh information as this
mainly consists the different sources like questionnaire, internet sources, journals and others
(Jeris and Nath, 2020). Other than this, information is existing already in secondary method by
consists the different sources such as articles, internet sources, journals etc.
Justification: In performing the present investigation, there has been secondary data
collection method used. The benefit of using secondary method is that it is cost effectiveness.
Someone has gathered data already; an investigator does not require to invest efforts or time to
collect data.
Time horizon
Time horizon explains needed time for completion of project work. Longitudinal and cross-
sectional are two different types of time horizon. The cross sectional data is mainly used when
all the observations are for single time like surveys. As contrary to this, longitudinal time horizon
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implies observation for specific variable that available for short time period (Danielli and et. al.,
2020).
Justification: Cross- sectional time horizon has been using because it provides the already
established data. This is mainly used when a research is related with study of specific
phenomenon at particular time.
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RESEARCH AND FINDINGS
The research findings are based on the secondary method of data collection. There has been
descriptive analysis used as this is based on the qualitative data. It helps in provide the detailed
explanation regarding the specific subject.
THEME 1: Positive responses for SMEs in order to recover from COVID-19
It has been analysed from above mention information in literature review part that
COVID-19 will put the several businesses on the life support. The SMEs trying to weather
COVID-19 pandemic will face financial blow that is worse than about they experience at the
time of more recession.
Figure 1: Coronavirus (COVID-19): SME policy responses
(Source: Coronavirus (COVID-19): SME policy responses)
The small firms have been scaling down and closing on temporary basis to stem spread of
more infectious virus. While the small and medium size businesses are mainly expected to
impacted most, several of them are trying to the reinvest themselves, searching the innovative
ways in order to keep operations. It can be going through leveraging the technology and also
keeping focus on consumers. In this, businesses are searching the unique ways regarding
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leveraging trend in order connect with consumers. Technology has been enabler at social
distancing which could better norm for the upcoming months. Online is necessary for the small
and medium size organisations whose ability to be generate the cash flows at lockdown time is
dependents on continuing to give services.
THEME 2: Business decision-making that SMEs are undertaking during COVID-19
disruption
It has been analysed that impact of COVID-19 disruption on SME performance across
UK is immense. There are many ways coronavirus pandemic impacts an economy mainly SMEs
on demand and supply sides. Impact on the SMEs is severe due to high vulnerability level and
minimum resilience concerned to size. Small and medium size organisations account for the
50% of total revenue that generated through UK businesses and 44% of labour force country.
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Figure 2: UK small and medium size enterprises view of current economy of UK.
(Source: How the COVID-19 crisis is affecting UK small and medium-size enterprises, 2021)
From the graph, it has been analysed that more than half view economy of country as
very or weak and also half market recession or stagnation. Perceptions like reflect the business
performance that worsened in May 2020 as compared with the April 2020.
THEME 3: Major challenges and opportunities being faced by SMEs in the UK
From the mention literature review, it has been examined that during the COVID-19
pandemic, SMEs face the many challenges and also opportunities. The main issue faced by small
companies is related to managing the cash flow when there have been sales reduces. In COVID-
19, businesses face the issues in managing the fixed cost related with the insurance, rent, staffing
and others.
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Figure 3: Government support applied for (% 361 entrepreneurs)
(Source: Government support applied for % 361 entrepreneurs)
From mention graph, this has been examined that government of UK put in the place
measures to support the entrepreneurs by pandemic. Many popular of these was Coronavirus Job
Retention Scheme to the furlough staff members with the 40% of entrepreneurs in sample
applying this. The businesses made use of the differed tax as well as rate payments.
THEME 4: Treats from external environment and potential opportunities for SMEs during
COVID-19 disruption
From literature review, it has been examined that the novel coronavirus that originated in
Wuhan, Chine and had massively spread all over the world. This has led a troublesome time for
individuals as well as the businesses at large. The pandemic had led Small businesses to suffer
with serious threats. Mostly the countries that are highly authoritative and structured government
including U.K had led to citizen being highly unsatisfied politically. It has already let numerous
changes in trade and may even continue to be a threat for years to come. It has even threatened
the economy by its poor market performance and even cause multi years recession. This stressed
situation has transformed the businesses and shifted all of them to digital medium. It is
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important for all the Companies to rebuild and realign their goals in order to able to survive in
the industry. They can do this, by utilizing the opportunities by attracting more customer's
through social media wherein they witness large number of their potential customer's. It is even
mandatory for SME’S to be well informed about the latest technology including AI and machine
learning and be able to innovate and utilize them for quicker and gain competitive edge over
their competitors.
THEME 5: Effectiveness of UK National Schemes and policy interventions to support
SMEs during COVID-19 disruption.
It has been analysed from literature review that the novel coronavirus has impacted the
economy in enormous ways including unemployment, mental health education and social
isolation. U.K government has realized that small and medium enterprises (SME'S) has suffered
most due to this wide spread pandemic. To minimizing their suffering, they have launched
various scheme to support them with a package of $330 billion in this crucial times. Some of
them can be explained below in detail:
 Coronavirus Job retention scheme: This scheme has supported many SME’s with the
wages up to euro 2500 per month for a minimum period of three months.
 Self-Employment Income Support Scheme: This scheme has ensured the self-employed
individual to receive 80% to their profit up to €2500 per month for at least three months.
 Coronavirus Business Interruption Loan Scheme; This scheme will support small
businessman by offering bank loans up to five million euro. Along with these, the
government has also promised them to cover the interest cost for the initial six months.
 Cash Grant Worth: The scheme has aided the smaller businesses across retail, hospitality
and leisure sector with cash grant up to euro 25000. In addition to this, this has all aided
them up to €10000 by way of small business rates relief(SBRR) and even rural rate relief.
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CONCLUSION
From the above mention report, it has been concluded that COVID-19 develops the negative
impact on small business firm. It impacts on the business firm in negative manner and economy
of country also. The aim of this research is to investigate the response of SMEs to COVID-19
disruption. The secondary sources have been used for doing the literature review such as articles,
journal and books. There has been discussion about the business decision-making that SMEs are
undertaking during COVID-19 disruption. Effectiveness of UK National Schemes and policy
interventions to support SMEs during COVID-19 disruption has been studied like Coronavirus
Job retention scheme, Self-Employment Income Support Scheme, Coronavirus, Business
Interruption Loan Scheme and Cash Grant Worth. There has been research onion used by
consisting the different layers. Interpretivism research philosophy has been used because it
provides the detailed explanation regarding the particular area. There has been inductive research
approach used because it is based on the qualitative research method and provide the in- depth
understanding. For collection of data, there has been secondary method used because it is cost
saving and easier to collect the information and data. Content analysis method has been used for
analyse the secondary method.
RECOMMENDATIONS
From the key findings, it has been recommended to UK government to provide the financial
support to the small and medium size business in United Kingdom during COVID-19 pandemic.
To enhance the business, it is necessary that small businesses should use the different social
media tools. It attracts the customers by providing them products and services at home in
pandemic situation. It is necessary for the government to develop effective policies in order to
support the SMEs in United Kingdom. Government of United Kingdom should introduce the
different measures regarding shortening of working time, sick leave and temporary layoff. They
give the wage and also income support for staff members laid off on temporary basis.
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REFERENCES
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