Circular Flow of Income: UK SMEs and Government Support Report

This report delves into the concept of the circular flow of income and its critical role in business operations. It examines the internal challenges faced by organizations, such as employee issues, customer retention, and the impact of work-from-home policies, particularly during the COVID-19 pandemic. The report also analyzes strategies for interacting with the external business environment, including social media usage and communication improvements. Furthermore, it explores the UK government's support for small and medium enterprises (SMEs) during the pandemic, focusing on financial aid and policy adjustments. The report concludes by highlighting the importance of understanding and managing the circular flow of income for business stability and growth, especially in the face of economic uncertainties and external pressures.

Circular Flow of
Income

Table of Contents
INTRODUCTION ..........................................................................................................................4
TASK ..............................................................................................................................................4
1. Examine the key challenges that impacted the internal environment of organisations..........4
2. Strategies of interaction with the external environment.........................................................6
3. Examine the role of the UK government in supporting the SMEs during the Covid-19........7
CONCLUSION ...............................................................................................................................8
REFERENCES................................................................................................................................9
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Examine the economic environment within which businesses operate in the United Kingdom.
.....................................................................................................................................................1
Examine the global business environment .................................................................................3
CONCLUSION ...............................................................................................................................5
REFERENCES................................................................................................................................6

INTRODUCTION
A business is smoothly managed with the availability and management of financial
income. The management and proper accountability of income is managed through evaluating
the profit margin that is received in business. So, a circular flow of income is very necessary for
evaluating the expenses of a company. The manufacturing and production of goods and services
is managed the circular flow of money(Abatecola and Cristofaro 2018). The functioning of small
and medium enterprises is managed by the income that is derived through circular flow of
income of the company. This circular flow of money is through channelling its source among
land, capital and entrepreneurship. This report will cover the effect of internal environment on
business organizations with the challenges faced by organisations. The impact of external
environment with the strategies applied for the period of pandemic. It will further cover the
support of UK government for SMEs during the period of pandemic.
TASK
1. Examine the key challenges that impacted the internal environment of organisations.
An organisation is very much affected and influenced with the internal elements as they
change the structure of a company. These elements can be irrelevant and without any mistake
that can impact the internal functioning of an organization. The organisation further evaluates the
important functioning of these internal elements and collaborates the strengths of these elements
for executing it in the organization. An organization can have a strong base in relation to the
strength of the component.
The base of an organization can be determined by the strength and weakness of a component
which can affect the organisation. This leads to consideration of different models that should be
used for improvement in the organisation.
The life of a manager is managed by internal climate of an organisation. The main and basic
elements of innovate ideas, structural institutional body and work force determines the
organisation of life of an individual (Arena, Michelon, and Trojanowski 2018). A company or
organization is run by the authoritative conduct of management by imposing their powers
through board of directors on the workforce of employees working in an organisation. Internal
climate has a direct impact on the organisations due to its ecological functioning within the

association. It helps in building and developing the position in market with aid of its assets and
capabilities. Therefore, capabilities, assets and skills which are evaluated in an organisation
determines internal climate. There are many factors that determine the internal climate of an
organisation which are mentioned below:
 Not able to pay their employees: The main hurdle that is faced by the head of an
organisation is difficulties that are beard by representatives within the organisation. The
workers working within the association face various problems like in-cordial relationship
with the managers and employees, unsafe work environment, health related issues and
unstable work timing (Calabrese, Cowling, and Liu, 2022). The responsibilities and
lifestyle of today's world forces the representatives to take additional responsibilities.
This forces the representatives to take responsibilities such as extra work load and extra
jobs which reduces their working efficiency. This take on extra responsibility with extra
work load increases the burden of representatives and prevents them from working
productively. These extra responsibilities are taken to manage the lifestyles along with
debt incurred by the representatives. The period of pandemic has made a very bad impact
on business in past two years. It has shut down many businesses like small and medium
enterprises as the company was running in huge loss and debt. Pandemic has majorly
affected the business enterprises by decreasing and reducing the market approach due to
immense loss beard by them. It has faced a major downfall in the markets of business due
to lack of funds and money in the market. These situations has further led to non-
payment of salaries to the employees within the organisation.
 Customer retention: Businesses have faced a major change in the management of
customers. There has been a great change in the experience of customers due to their
changing needs and demands. The assistance of a customer is very necessary to satisfy
him in relation to the quality of product and services. Customer assistance includes
information and details of their purchase history with their contact details in order to
solve their issues or problems. These assistance given to customers though specialists
was then checked which led to some issues. The period of pandemic has led to taking up
of many jobs which also took the jobs of customer agents. This has led to major issues
among the customers without solving of their problems due to lack of agents (Dhewanto,
Nazmuzzaman, and Fauzan 2020). The most safe way of working during the pandemic

was through remote work. The main hurdle in this remote work is unfamiliar framework
at the place of work. The sudden arrival of pandemic had paralysed the working system
within organisation.
 Work from home: The members of association or workers of an organisation have been
majorly affected with the wave of pandemic. COVID-19 has raised many difficulties in
the life of people by lowering their progress or growth, slowing down their workforce,
affecting their physical and mental health in a very bad way. The closed doors have
affected the individuals in a way that their access to outer to outer world was so reduced
that it decreased their efficiency to work (Li, Westlund, and Liu 2019). Constant sitting
in homes has made the person lazy affecting their physical health in such a way that it has
mostly caused the problem of being overweight. The stamina and energy of people has
been decreased due to working off in closed spaces. Telecommunicate was the main
source for communicating with people which made a major gap in the conduct of life of a
person. Various institutions like schools, colleges, coaching centres have also been closed
during the period of pandemic which majorly affected the productivity of students. The
mental health of a person have been affected by facing immense work pressure in order
to meet the deadlines which has created stress among the individuals. These dreadful
affects of pandemic can be prevented with care and precaution towards the physical and
mental health. Physical activity such as exercise can help in retaining the physical
strength of a person and brain storming for creative ideas with availability of peaceful
environment in workplace can help in retaining the mental health of a person.
2. Strategies of interaction with the external environment.
The functioning, structural body of a building and direction of the administration is
affected by the external environment. External climate is verified through consistent analysis of
the structural workforce. The main necessity of external environment is for keen observation of
the working system in the organisation. There must be constant and consistent analysis of system
in order to avoid future damages, losses or injuries. The performance of an organisation is
affected by the outer force of external environment. The organisation is affected by different
external factors that affect the organisation. These external factors are not in control and beyond
the power and authority of head of the company (Masood and Sonntag 2020). The decisions of
supervisor or head of the company is influenced by the external atmosphere or environment.

External climate is classified into two conditions such as large and micro conditions. The
functioning and activities of workers, members, suppliers, banks etc are affected by the outer
structure of external microclimate. There is no direct impact of external environment on the
organisation. The different factors of social affairs, changing policies of government, financial
stability and changes in innovation determine the affects of external environment.
There are many external aspects that affect the external environment of a company which are
mentioned below:
Social media usage: The use of social media has made a huge impact on the employees working
in the organisation. It has served as a great medium for communicating with the workers in an
effective way. Different people are able to communicate with one another at a time which makes
it easy for directing and communicating orders related to work. It can also prove to beneficial for
the company in long run. It enables the company to be aware about the ongoing trends, practices
and policies that are being followed by people in order to have an advanced competitive spirit.
The objective of an organisation can be achieved by understanding the needs and demands of
public and accomplishing its targets in the market.
Improving of communication: The individual of a company can improve their communication
with purpose of serving the company for a particular time period. Communication serves as an
external way or medium for effectively doing the work in organisation. There can also be use of
different techniques and methods for improving communication and to make it more better and
effective. The use of different communication technologies can aid in providing a great source
for communicating with the people (Uhl-Bien and Arena 2018). Communication helps in
understanding the views and perspectives of different individuals by talking to them on a phone
call. This serves as a medium for identifying the issues that are raised while working and also
having a greater view of the activities within the organisation. The ongoing process of the market
is verified through the medium of communication which helps in getting creative ideas and also
understanding the existing issues in order to solve them for growth of economy of the company.
Communication can further help in being prepared for any future disability that may arise in the
future and effectively resolving these issues or disabilities.
3. Examine the role of the UK government in supporting the SMEs during the Covid-19.
The wave of pandemic has majorly affected the economy of a country. It has affected the
small and medium enterprises by limiting the supply demands for the customers. The

deteriorating physical condition of the workers or employees has also prevented them from doing
the work. The ill state of the workers with the responsibility to take care of their family has led
to negatively impacting the process of working. The condition of lockdown has majorly
impacted the working capacity of an employee by decreasing their productivity and efficiency.
This has led to decrease in demands which has in turn reduced the income medium for SMEs.
These Small Medium Enterprises have been affected due to lack of funds or financial capacity of
enterprise.
The government of UK has supported these Small Medium Enterprise by providing them loans
in order to stabilise their financial capacity. These loans were provided without the policy of
repayment in order to help the companies to compensate their losses without being shut down.
There was also relaxation in tax payment with launch of other schemes and policies in order to
support these small medium enterprises (Vidmar, Rosiello, and Golra 2020). The government
also helped the under privileged people with the medical aid by providing them free medication
and other medical services. The situation of COVID-19 was managed by government in these
ways by providing them vaccination facilities and availing them with required medical and
financial aid. There were various guidelines laid and imposed on people in order to lead a safe
and healthy life. It has been very helpful in order to maintain and stabilise the medical and
financial situation of the people.
CONCLUSION
From the above above report it is concluded that the aspect of circular flow of money is
very essential for smooth functioning of an organisation. The smooth flow of money is very
essential for the functioning of an enterprise especially of Small Medium Enterprises. These
enterprises can only run if their financial capacity is effectively managed by the management of
an enterprise. The business functioning of a company was also affected by the internal and
external environment climate which are challenges that were faced during the situation of
COVID-19. Business of small medium enterprise faced huge loss due to the effect of pandemic.
The government of UK has supported the organisations of Small Medium Enterprise by

providing them loans with relaxation in their tax payment. It has also helped the underprivileged
people by providing them medical facilities of vaccination and medical aid services.
REFERENCES
Books and Journals
Abatecola, G. and Cristofaro, M., 2018. Hambrick and Mason’s “Upper Echelons Theory”:
evolution and open avenues. Journal of Management History, 26(1), pp.116-136.
Arena, C., Michelon, G. and Trojanowski, G., 2018. Big egos can be green: A study of CEO
hubris and environmental innovation. British Journal of Management, 29(2), pp.316-336.
Calabrese, R., Cowling, M. and Liu, W., 2022. Understanding the dynamics of UK Covid‐19
SME financing. British Journal of Management, 33(2), pp.657-677.
Dhewanto, W., Nazmuzzaman, E. and Fauzan, T.R., 2020, September. Cross-countries’ policies
comparison of supporting small and medium-sized enterprises during covid-19 pandemic.
In Proceedings of the European Conference on Innovation and Entrepreneurship, ECIE (pp.
218-225).
Li, Y., Westlund, H. and Liu, Y., 2019. Why some rural areas decline while some others not: An
overview of rural evolution in the world. Journal of Rural Studies, 68, pp.135-143.
Masood, T. and Sonntag, P., 2020. Industry 4.0: Adoption challenges and benefits for
SMEs. Computers in Industry, 121, p.103261.
Uhl-Bien, M. and Arena, M., 2018. Leadership for organizational adaptability: A theoretical
synthesis and integrative framework. The leadership quarterly, 29(1), pp.89-104.
Vidmar, M., Rosiello, A. and Golra, O., 2020. Resilience of new space firms in the United
Kingdom During the early stages of COVID-19 crisis: The case for strategic
agility. New Space, 8(4), pp.172-178.

Virgin Money
Disrupting the UK
Banking Sector

INTRODUCTION
The United Kingdom has always been a strong hub for the banking and financing sector.
In UK there are various number of banks differentiate in their sizes like there were private banks
in which there is less interference of the UK government, there were international banks also.
The banking sector covers the retail as well as commercial banking activities of deposit and
taking institution. The banks accept the deposits and also provide the loans to the individuals and
to the businesses, Building Societies are not included in the bank industry of the United
Kingdom. The Virgin Money which is the banking and the financial institution of the UK, Its
headquarter is in London. In this report, the banking sector of the United Kingdom has been
discussed and what role does Virgin Money group of UK has been played to developed the
economy of the country. Apart, from that the global business environment of UK has been
discuss and how the other countries put an impact on the UK business environment.
MAIN BODY
Examine the economic environment within which businesses operate in the United
Kingdom.
The economic environment in which the business operates are of two types i.e. Micro and
the Macro. In the context of the Virgin Money Group, the micro factors would affect the
organizations;
Values the customers- The company is running to provide the financial aids to the customers,
for the company customers are the main factor which gives a flow in the economy. The main aim
of the company is to satisfied their customer and make their banking facilities differ from the
other banks(Blackman, 2019).
Provide Easy Access- The main aim of the industry is to provide the easy access in the internet
banking unlike the traditional system, in which the customer has to visit the bank for every
service. The Virgin Money Group provides the digital access in their phone which, make the life
of the customer easy and they will be free to use their banking from anywhere.
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Structure of the Organisation- The structure of the institution is well maintained and the
responsibilities are also divided among the different level of management. There is a top level
management who controls all the function of the institution, just subordinate to the top level
managers there are also some medium level managers who were responsible to give answers to
the top level managers(Flaherty, 2021). In the last there are the lower level of management ,
who were responsible to answerable to their senior level managers.
Corporate Nature- The Virgin Group of Money is full digital, it doesn't need the lot of paper
work. Their services are well maintained, the customers are satisfied with their services and also
they fulfil the need and requirements of the businesses and their customers.
Human Resource- The industry for better regulating the operations, recruit the best employee's,
who has the skills to deal with the customers politely and sensibly. The employee's should have
the knowledge of the financial and banking sector(Leonida, 2018).
Other Resources- The industry also have to take care of the other resources of the company
which helps the industry to run smoothly. The institution can use the business analytical tools
like cloud automation, data structure, data modelling and some other business analytical tools wil
be use to run the operations of the institution effectively and efficiently.
These are some internal environment factors which affect the operation and the function of the
organisation . Other then these the company also has to deal with the external environment which
also affect the industry functions from outside the structure such as:
Boom in the prices- All the financial institution has a great effect on the prices of the
commodities. It means the fluctuating in the economy would affect the banking
activities(Muzzupappa, 2018) . In the situation of the inflation, the financial institution also roses
their interest rates and there is indirect link of the profitability of the institution and the inflation
in the UK.
Rate of Tax- The financial industry has link with the external factor also, like the tax rate
influenced the activities of the banking industry. When the rate of Tax got high then, it directly
increases the rate of interest of the financial institution.
Other Financial Institution- The Virgin Bank is a small medium enterprise, thee are so many
other banks which gives the competition to the Virgin banking industry and affect the working
operations of the industry.
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