Over the past few years, market disruption has become the norm. As businesses were picking up the pieces post-pandemic, the cost of living crisis hit. Not to mention the shocks inflicted by the ongoing conflict in Ukraine and supply chain shortages. These constant upheavals have forced business owners to adapt or face closure. Many businesses have found themselves in survival mode. As a result, in 2023 we have seen an increase in insolvencies, bad debt and fraud. For example, in July 2023 there were 1,727 company insolvencies. 248 of these were compulsory liquidations - an 81% increase from July 2022. A recent study found that around 1.5 million UK SMEs are struggling with bad debt.
This makes prospecting for new business more complicated. With more than 5 million businesses on Companies House and huge amounts of data to analyse, worrying behaviour and unstable companies can slip under the radar. More and more financial service providers are looking to AI to help process applications. In fact, 72% are using or developing machine learning tools. This may lead to a situation where banks can no longer understand why applications are approved or rejected.
We’ve created a powerful search tool to help solve these problems. Data Search lets you filter the entire Company House database so you can find companies that fit specific criteria. This tool can locate potential risks in your portfolio, as well as uncover potential business opportunities with stable companies.
Let’s take a closer look at the key risks and how a major high-street brand uses Data Search to mitigate these risks and find new business.
Key risks in 2023
Choosing companies to work with can be a minefield. Sometimes the dangers are obvious, but the events of the last few years have made it much more difficult to spot issues that have been buried in company reports. Here are some of the key risks companies need to be aware of in 2023:
Bad debt and insolvencies
The pandemic saw unprecedented levels of borrowing, with previously healthy companies taking on debt. This led to debt levels skyrocketing, and the money has to be paid back. In the current economic climate this is not possible for many struggling companies. There has already been an increase in insolvencies and the number is expected to continue to rise.
Fraud
In 2023, it was revealed that £21 billion in public money was lost through fraud. £7 billion was directly related to government COVID schemes. Many businesses applied for and received money they weren’t entitled to, whilst others applied for the same loans multiple times. We can expect to start seeing more prosecutions as the government attempts to recoup some of this money. A company may look like they have a clean record on the surface, but a prosecution could still be in the works.
Data accuracy
Since 2021, over a million UK companies have failed to file accounts, and another 2 million companies haven’t filed since 2022. This means that there is a high risk of calculations being made using old data from during the pandemic. This data is unlikely to reflect a company's true, current performance. Any decisions based on this data are little more than guesswork. This issue is exacerbated by banks looking to AI to help them process this data. The more AI is relied upon, the less control the banks have over their lending decisions. This could lead to missing out on great opportunities or missing potential risks.
Rigorous vetting is vital to ensure these risks are uncovered. That’s where Data Search can help.
Using Data Search to cut through the noise
Data Search is a unique tool that can filter the entire UK company population using highly granular criteria. It can help you wade through vast amounts of data, weeding out potentially risky businesses and spotting opportunities. Data Search has helped major banking brands to find new business by filtering the data in very specific ways. Here are some examples of how this tool can be used to mitigate financial risk and support business growth:
- Data Search allows our clients to proactively monitor their customers. Portfolios can be filtered to pick up on distress events filed in the London Gazette (including winding up petitions or administrative notices) and insolvencies can be picked up early.
- It can uncover ‘zombie companies’ that are surviving on low interest debts, protecting you from unstable partnerships.
- Data Search can filter out companies with late filing notices and notify you if there has been a change of accounting reference date.
- Companies can be filtered by their financial health scores (like our H-Score®), as well as P&L statements, turnover, and net worth.
Our banking clients have used Data Search to create lists of highly targeted prospects. Their business development teams can use this information with the confidence that the companies have been chosen based on very specific criteria.
These are just a few of the ways that we can help you to spot financial risk, find new clients, and grow your business. To find out more about Data Search or to arrange a free trial, don’t hesitate to get in touch.
