Companies Act Allows UK to Track Innovation and Investment Activity

 There are 5,094,308 active companies in the UK (as of 15/11/22). 15,341 of them have turnover of more than £50m. 25,651 have used equity investment in order to grow. 17,533 have received an Innovate UK grant. We only know this because of the disclosures required by Companies House. It’s aided by the disclosures made by other organisations such as Innovate UK and also by the research and analysis conducted by our own company, Beauhurst.
 
Companies House is a government-run organisation that registers the incorporation and dissolution of all companies in the United Kingdom. It also holds all kinds of company information on these entities in accordance with the Companies Act. Information provided in accessible digital form include the incorporation date, any previous business names, appointment and termination dates of directors, and the business status - whether it is in the process of being wound down or struck off due to non-compliance. The register also holds in scanned document form articles of association, annual accounts, share allocations, and more.
 
Millions of professionals use this register of companies and the financial, structural and event-based data held on it to inform business decisions on a daily basis. Verification of information about prospective clients, suppliers or counterparties allows businesses to engage other companies with confidence about the nature of the company itself, its backers and its employees.
 
But the data contained in these filings are not perfect. Firstly, although accuracy and truth are required by law, the data in the filings is not routinely checked. In particular, the identity of directors and shareholders is not verified, leading to high-profile examples like Jesus Christ (occupation ‘Creator’, nationality ‘Angelic’) to be appointed as a company director, but also far wider opportunities for fraud. Secondly, much of the data is often stored in hand-written forms rather than digitised. There is an extensive task (which Beauhurst conducts) to digitise and then structure this information. 
 
The UK has not always had such transparency and accessibility of company data. Historically, Companies House has made information available to anyone for a fee. This changed in 2014 when David Cameron’s government announced the removal of all fees in an effort to increase corporate transparency in line with the 2013 G8 Declaration. The previous year (2013/14), customers had spent $10m accessing company information on the register. 
 
Announcing the change, Cabinet Office Minister Francis Maude said: “The UK is an international leader in open data because it sharpens accountability, exposes waste and informs choice over public services. It is also the raw material of our age, providing opportunities for entrepreneurs to create new data-led businesses and fuel growth as part of this government’s long-term economic plan. Today’s announcement underlines our commitment to ensuring that data of most value to citizens and businesses is released and is as widely accessible as possible.”
 
And Beauhust is one of many entrepreneur-led firms that has been able to make use of this data to further aid transparency. Through the Beauhurst platform, we provide greater searchability and transparency of all the data on Companies House. Specific research we conduct allows us to expand on, verify, and enhance the information that is available via Companies House. Through our platform, our clients can win new business, identify investment opportunities, and understand whole sectors or geographies.
 
The openly available starting point – required by regulation – has enabled us to create our database which in turn has catalysed the UK’s high-growth and innovative ecosystem. We have built upon the data that is processed by Companies House and through our platform and consultancy provide insights to a host of stakeholders who support the UK’s startups and scaleups. We provide national, regional and local government with summary analysis on the health of entrepreneurial activity in the UK. We provide VCs with the information to find the best investments for their theses. We provide banks with a better understanding of the high-growth customers in their existing client books. We provide corporates with targets to engage, acquire, or monitor. The ecosystem functions more efficiently when there is data about every actor.
 
Our ability to track innovation, investment activity and growth would be significantly impeded were it not for the fact that disclosures are required by the UK’s regulatory environment. 
 
In line with the recommendations set out in Kauffman Foundation’s ‘America’s New Business Plan’, implementing the changes above at state level could help reduce the barriers to starting a business (through digitalization) and expand access to capital - by providing greater trust between startups and investors, and by tracking overall investment activity and trends to help identify gaps in financial provision.