by Philip T. Fliers (Queen’s University Belfast)
This blog is based on research made possible by the Carnevali Small Research Grant, funded by the Economic History Society.
Research on the pre-1986 evolution and performance of UK businesses is severely limited by the availability of historical accounting information. This lack of data impedes our understanding of the UK economy during the twentieth century. If we want to understand the future of UK businesses, we must get a grasp of its evolution in the period prior to the availability of modern databases.
This project utilizes historical accounting data of the Top 100 listed companies in the UK between 1900 and 1986. At present, I have collected balance sheet, profit/loss accounts and profit distribution accounts for the Top 100 companies during this period. The next steps in my research are to transcribe all collected information into a database; standardize all accounting formats used during the twentieth century and, finally, link the database to contemporary sources of accounting information.
To transcribe all accounting information into a database is not a simple task. As can be seen from Figures 1 and 2, the accounts of Dunlop Rubber Co, and Maple & Co — two companies appearing in the Top 100 during the 1920s — look distinctly different. Not only do they report different line items, they also report very similar line items such as, ‘stock of finished and unfinished goods […]’ (Dunlop Rubber Co) and, ‘value of stocks-in-trade (Maple & Co). These two balance sheet items are what we would traditionally refer to as inventory.
The objectives of my research are to transcribe all the accounting information into a database, and to standardize accounting practices during the twentieth century. These accounting practices differed between firms within one single year and inter-temporally. By creating this framework to standardize historical accounting practices, we will be able to link our data to contemporary data sources such as Datastream, and to make comparisons over time. This allows us to trace the performance of UK businesses from the start of the twentieth century to the present day.
This research will provide answers to prominent research questions regarding the evolution of the UK economy during the twentieth century. For example, the data will enable economic historians to resolve important questions such as the UK’s ‘productivity puzzle’ which previously would be addressed using limited plant-level or aggregate industry or macro-economic data. Additionally, this new data will allow us to examine how access to finance and firm’s investment policies have shaped the performance of UK business over the long-run. Making historical firm-level accounting widely available will allow for a more fundamental examination of the microeconomic determinants of the performance of the UK economy.
Overall, this project will alleviate the struggle of economic and financial historians in their search for reliable, digital, and accessible historical financial data in the UK. The wider contribution is making the historical accounting data accessible. This will enable researchers to gain a deeper understanding of the evolution of the UK’s economy. For the first time, researchers will be able to examine how exchange listed companies navigated through distinct periods in the UK’s history. Taken together, this research should lay the groundwork for many inquiries relating to the performance of UK businesses during the twentieth century.
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