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SMEs in UK: Challenges, Strategies, and Government Support

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Introduction - Defining SMEs and Their Role in UK Economic Growth

The task 1 of the study is related to the concept of SMEs which is usually defined as small as well as well mid sixed company where the workers numbers are less than 250. SME’s are usually categorized under private sector and this kind of business within UK at the initial of 2021 was approximately 5.6 million. In between them 5.5 million business was under small sized and 36500 was under mid-sized. Overall the entire study will be discussing about the SME’s in general. The main segment of the study will discuss about the main challenges that affected the inner ecology of the companies on UK as well as their tactics of communication with the exterior ecology since the last two years. In addition to this the study will also provide its focal point on the function of UK regime in assisting the SME’s ate the time of coronavirus disease.

General trend of SMEs in the UK

Since 1 January 2021, there were 5.6 million SME organizations in the UK, contrasted with 5.9 million out of 2020, a fall of 6.5%. This is just the second the year-on-year decrease in the number of private area organizations in the UK since practically identical records started in 2000 - the other was somewhere in the years 2017 and 2018,at the point when the number of organizations drops down by 0.5%.Regardless of this fall, the quantity of organizations has developed extraordinarily, from3.5 million organizations in 2000 to 5.6 million every 2021 - an increment of 2.1million, 61% over the entire period. The drop down was generally of organizations without any representatives, the biggest segments of UK organizations. This segment of SME was noticing influential development before the pandemic; yet saw a 9% fall in number somewhere in the range of 2020 and 2021. The decrease in the number of SME's without any workers connects with a drop down in the number of inhabitants in independently employed specialists during the pandemic. As indicated by the Office for National Statistics (ONS) Labor Force Survey, the number of independently employed specialists was 14% lower in Q2 2021 contrasted with Q12020 (Hutton, 2022).

Key challenges that impacted the internal environment of SMEs and their strategies of interaction with the external environment during the last two years

There are several challenges that are faced by the SMEs which include leadership challenges. It has been found out that there is no significant or any kinds of academic qualification to be a leader of an SME. It has been found out that during the economic turbulence that has been created by the recent outbreak of the COVID-19 pandemic and the subsequent reception faced by the world, it is very important for all the companies including SMEs to have the right leadership style. Maintaining the culture of an organisation even after receiving several threats from the external environment has been one of the major aspects and key challenges of all the business management or owners of an SME (Naradda Gamage et al., 2020). It is very important for the management of these companies to focus on establishing several values so that the employees of the companies can be aware of them and can perform duties on the basis of them. The organisations also face a lot of consequences due to the lack of leadership development which should be planned by these SMEs. They should focus on developing a well-documented, single page business planning tool that should be available for them in order to help the business focus on what is important to them and how they should function. Another major challenge for these companies is that they should focus on attaining each of the objectives that have been formulated in order to succeed by carrying out the process of executing the strategies, plans and ideas (Mustafa et al., 2019). It is also important for the organizations to understand that they need to align their productivity with good quality processes and systems which is another challenge faced by the SMEs.

One of the major challenges of these SMEs is to focus on finding the right people who will be helpful for them in terms of growth and contributing towards success. It is important for the team members to ensure that all the functional aspects of the organisation are being delivered such as marketing, sales, production, accounts and operations. In order to run our business productively and grow them effectively, it is the responsibility of the managing director or the owner of the company to remove any kind of destruction of operating them on a daily basis. It is also very important for the company to focus on understanding how to bring about a competitive edge which is one of the major concerns for the SMEs (Johnstone, 2020). In order to focus on bringing profitability it requires the business to spend time, money and resources in order the company has done everything enough to stand out. In order to help the business stand out in the competitive market place, it is important that the focus on completing and obtaining the customer service, quality, convenience, price and many more aspects. Another major concern of these businesses is that a lot of these businesses focus on thinking that having a process in the system will make them less competitive which is very much untrue. It is required for this business to have distance and processes which are tried and tested in order to focus on delivering a better quality service and product to the customers (Asad et al., 2018).

For the purpose of striking and establishing interaction with the external environment, these SMEs have focused on adopting, establishing and exploiting the forces of the external environment along with actively and deliberately forming strategies together in order to serve a purpose through coordinated and structured goals and plans. In order to obtain a competitive advantage in the present market scenario and to deal with several other related factors such as inflation and recession, these SMEs has focused on analyzing the employee benefit the options of hiring and unemployment in order to understand the governmental policies, natural disasters, technological inventions, socio-cultural forces, international war and many other factors so that they can keep up with the changing business scenario and responding appropriately by making appropriate strategies (Davcik et al., 2021). These people and management have also referred to the digital commerce strategy which has been used by Jeff Bezos in order to become the leader of retail commerce. The companies have also majorly been able to communicate with one another with technological advances to improve their service quality, price, speed and service of the product and service deliverability in order to improve their competitive advantage (Mustafa et al., 2019). These companies are also trying to accustom themselves in using technology such as social media in particular so that they can be ready and equipped to provide their employees and customers with wellness and learning experiences that will be helpful for them in attracting and retaining new talent.

The role of the UK government in supporting the SMEs during the Covid-19

Throughout Covid-19, the UK government seems to have been a fervent supporter of SMEs. The government has committed to providing financial assistance to small businesses and UK-based SMEs that have been impacted by the disaster. The government offers emergency loans and other block grants to these businesses in order to help them survive the crisis. Furthermore, the government has provided incentives to local businesses in the Covid-19 countries are intended to facilitate the others in learning and expanding (Calabrese, Cowling, and Liu, 2022). The UK Government provided over £ 1 billion of content to help small businesses recover from accidents. These packages also include financial assistance, government financing, and special assistance. Covid-19 provided UK SMEs with an early opportunity to rejuvenate their structures and reduce the occurrence of downtime. It is the Government's responsibility to help UK SMEs prepare for Covid-19 by providing training, data, training, and support. The government can achieve this by allowing SMEs to be fully aware of Covid-19 and provide the necessary information and advice (Belghitar, Moro, and Radi?, 2022). In addition, management needs to provide SMEs with the learning and skills they need to prepare for Covid-19 as much as possible. .. The British government has paid debts to turn off lights, minimize energy use and keep workers busy, even for these companies. The government is in control of overseeing the activities of certain other foreign organizations such as the United States, Canada, and Australia to support Venezuelan SMEs. The UK Government has provided £ 1m to support the event, and other organizations are expected to help fund the event. It has been decided that a total of £ 2m will be required to hold this conference (Cowling, Brown, and Rocha, 2020).

During the aluminium manufacturing crisis, the UK government brought considerable assistance to small businesses. The UK government loaned and invested more than $20 billion, including $12.4 billion through capital and $4.6 billion in cash flow. The UK government provided additional insurance protection for small business owners during the crisis by extending the Small Business Express Lenders Program. This program provides up to $3 million in financing to small business owners in Covid-19 impacted areas to help them grow and thrive. The Government of the UK also started employment support measures, including the employer in the UK with a “pay as you earn” scheme which helps them access support to continue paying the salary to employees if they earn and sometimes they are not able to pay. In addition to this, the UK government also outlined the details regarding the Self-Employment Income Support Scheme which helps the self-employed people with about 80% of monthly income in the last three years of tax which is covered at £2500 each month. The UK government has applied a number of policies and practices to assist small and medium enterprises, and these guidelines have helped in the development of the microfinance industry. The UK government will provide £1.5 million to support SMEs in the rivalry, which is a significant amount of money for small businesses and over double what was provided by previous competitions (Adam, and Alarifi, 2021). This funding will be used to create methodological roadmaps that will help guide future asset decisions for these companies as well as provide them with advice on how they can access additional finance and other services from the Department for Business Innovation & Skills (BIS) 

The advantage of government offerings is that they work directly with SMEs to provide bespoke support and a variety of solutions to help your business in difficult times. The main problem is that support is irregular and not always tailored to the needs of individual SMEs. Therefore, there are many benefits and benefits that the UK government has given to SMEs during Covid-19, allowing them to compete in the market. Dealing with difficult situations during a crisis helps companies grow properly (Bulin and Tenie, 2020). The UK Government's programs and policies have played an essential role in supporting small and medium-sized enterprises on a large scale. It is considered an essential part of the country to provide assistance to SMEs for better opportunities in the future.



The economic environment within which businesses operate in the United Kingdom

Based on the evidence found from the case study of Virgin Money (VM), it can be stated that there is a steady growth in the economy of Britain which has been helpful in thriving the world's fifth largest economy. Based on several pieces of evidence, it can be stated that the United Kingdom has an economy which is fiercely independent and developed along with promoting International trading for a long time now. The development in the manufacturing sector has majorly been able to reduce employment and its contribution to the GDP. Once the growth of the economy in the UK has returned, there was a great improvement in the profitability and productivity of the British manufacturing sector (Slorach et al., 2020). It has been found out that several major factors have relatively been able to contribute to the GDP and economic development of the UK and includes engineering activities, beverages and foods, tobacco, paper, chemicals, printing, metals and minerals, textile and publishing, footwear and clothing, and leather. According to a report, trade has been one of the major aspects and pivotal factors to the economy of the United Kingdom. The total value of import and export that has been operated in the UK has been able to represent nearly half the GDP of the country. It has also been found out that the volume of both the imports and exports of the UK has increased and grown steadily in recent years. There are several factors that has contributed positively to balance out the trade-in retain and includes particular financial services such as export and import of chemicals, oil, transport equipment, electronic equipment, automobile, machinery and many more (Adedoyin and Zakari, 2020).

This has also been found out that there is an increasing share of the trade in the United Kingdom that has taken place due to other developed countries. Joining the European Economic Community has caused it to be one of the major orientations of trade flow. The economic growth has also taken place due to the investment facilities made by the companies of the UK and foreign earnings growth. The Government of the UK has supported liberalisation and has been able to participate in international trade organisation. One of the major factors which has been remarkable in the contribution of economic development in the United Kingdom is the growth of various service industries that have been able to provide about two third of the GDP along with contributing to three fourth of the total employment factor (Kenward and Brick, 2021). The revenue generated by the government along with the organisation including corporate tax, income tax, sales tax, and the national insurance has been able to contribute towards an economy that is developed and progressive in the UK.

It has been found out that one of the major data on the employment market of the UK such as the rate of unemployment, net change in employment, economic inactivity weekly average earning, labour productivity and vacancies has been able to be a representative of the population in the UK over the last three months period rather than a single month. With the help of CPI inflation indicator, it has been easier for the companies of the UK and their stands to measure inflation at both the consumer and producer level respectively. The construction of this indicator has been able to help the companies in comparing several changes that have taken place over a specified period of time in the cost of a fixed basket of goods and services that has been produced by the companies and purchased by the consumers (Karagianni et al., 2019). This has been used by the government of Britain in order to target inflation and is also used for indexing functions of every individual along with providing them with specific wage and benefits. Since 1983, the Government of the UK has been able to operate by combining current and capital account deficit on an annual basis that means it has been able to borrow money from the rest of the world.

The global business environment and its impact on countries

The global business environment can be explained as the ecology in various independent nations with aspects exogenous to the local ecology of the company impacting the decision creation on assessable deploy as well as abilities (Cazurra, 2011). In this segment of the study, a brief examination of the international business environment as well as its effects on various countries, including the UK, will be conducted. As stated by Surjit Singha, businesses of any size might be affected by the internal business ecology, which is a mixture of political, financial, and national framework (Singha, 2018). Global business ecology has numerous positive aspects in that it contributes to new innovation, framework development, administrative abilities, creating positions, offering better types of assistance, and obtaining venture capital from various countries by sending out items (Skripak, 2016).Worldwide business is an important aspect of the cutting edge economy in which specialised progress has likewise made it feasible for associations to introduce their business on a worldwide premise. Global business is a fundamental context for a nation's financial system. Most of the planets, in addition to the biggest economies like Germany, Japan, Switzerland, and others, according to the Operation for Economic Co-activity and Development (OECD), are centred on global exchange exercises and have the best expectations of living. These countries receive maximum volumes of imports and products, while nations like Spain, Greece, and Italy, and so on, have lower proportions of global exchange and are subject to a few serious financial issues and difficulties. In this way, we can say that the international business climate plays an essential part in the development and improvement of a country (Bhattacharjee.Archita, 2020). Now, the notion of the global business environment can also be explained using the Mercantilism Theory. Mercantilism is a monetary hypothesis that advocates the unofficial law of worldwide exchange to create riches and fortify public influence. Vendors and the public authorities cooperate to diminish the import/export imbalance and create an exchange excess (Amadeo, Kimberly, 2022). Mercantilism presents an opportunity to expand a country's financial system by means of its commodities. English monetary development was impelled by natural substances provided by its provinces so the country could send out completed items. Mercantilism achieved many demonstrations against humankind, including subjection and an imbalanced arrangement of exchange. Now, in order to explain the global business environment and its impact on countries, a few examples will be provided, like China, India, and the UK.

China is considered to be one of the most developed economies in the world and provides numerous business opportunities for international speculation. Nevertheless, the nations have a massive perspective for fanatical development, providing permission to a huge business sector, but they are facing global business threats from all across the world. Considering the international business environment and its impact on China, it can be seen that following a powerful reverberation in the initial quarter of 2022, the financial development within China will slow down quickly again due to the occurrence of the second wave of Coronavirus, Many international companies have stopped their business relations with China, which means that international business has negatively impacted the Chinese business culture overall. The Chinese government forecasted actual GDP development to arrive at 8.0 percent in the year 2021, up from the prior year's 5.1 percent in 2022. The decrease reflects less-positive base impacts, decreased help from trades, and the public authority's continued deleveraging endeavours (Tugores, Juanjo, 2021).

As reported in the article published by McKinsey, India will see development in business from the year 2023 to 2027. This investment of roughly $130 trillion will go toward projects to decarbonize and recharge the basic framework. Yet, scarcely any associations are ready to follow through on this capital inundation with the pace and productivity it requires. Organizations are required to consider implementing a portfolio-synergistic methodology in which planning is done from the top down, a significant business issue necessitating smart partner administrations, capital business sector specialists, and comprehension of complex approval processes (McKinsey, 2022).

However, considering the situation in the UK, it can be said that the integration of the global business sector has majorly expanded the selection of customer-based products. Though this country has also faced huge business losses from all over the country due to the coronavirus, they have become familiar with the year-round accessibility of business, for example, fruits and vegetables, because of the urgent demand for food imports. The impact will be better explained using a PEST analysis of the UK. :


  1. The degree of worldwide political steadiness
  2. The degree of administration in foreign relations
  3. The media's level of opportunity
  4. Worldwide exchange control drives consideration of the COVID-19 protocols.


  1. the consequences of increased monetary integration of global business sectors
  2. Worldwide monetary emergency
  3. Stock market vacillations
  4. Cost benefits moved by arising superpowers, for example, China, India, etc.


  1. The expanding fame of movement and relocation rehearses
  2. Expanding portability between friendly classes
  3. More prominent worries for minorities in the public arena


  1. The degree of worldwide mechanical foundation to deal with COVID-19 impacts
  2. Industry-explicit mechanical forward leaps (Dudovskiy, hn, 2022)


So, from the overall discussion done in Task 2 which was related to the case study of Virgin Money it can be said that the economic environment within which the company is performing right now is very stringent due to the on-going Covid-19 restriction. With the restricted nature of the economy the company is facing a lot of challenges still there are some scope to recover from the challenges as UK is developing fast after the pandemic. With this it can be said that it is one of the most developed economy in the world. Lastly, considering the second discussion which was on global business environment and its impact on countries three countries situation has been discussed in this scenario where it has been identified that out of the three countries the most effected by pandemic was China and India as compared to UK.


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