AI adoption boosts UK accountants' profits, Xero says

Xero has published UK research linking higher profitability at accounting and bookkeeping firms to embedded use of artificial intelligence. The study found that the most profitable firms recorded net profit margins more than twice those of lower-margin peers.

The findings are based on a survey of 520 independent senior accountants and bookkeepers across the UK. It defines top performers as firms with net profit margins of 41% or above.

The report suggests AI is generating measurable time savings across the profession, with the biggest gains concentrated among firms that have moved from trial use to routine adoption in daily workflows. Across all surveyed practices, AI saved an average of 7.1 hours a week, which respondents estimated was worth about GBP £108,000 a year in staff time.

Among top-performing firms, the gains were significantly higher. Practises that had embedded AI into day-to-day work reported average savings of 10.6 hours a week and an estimated GBP £202,000 a year.

A clear divide also emerged in process discipline. Among practices actively using AI in daily workflows, 87% said their core business processes were well documented and regularly updated. That compares with 18% of practices not planning to use AI.

Advisory focus

The research points to advisory work as one of the main uses for time freed up by automation. Advisory had the highest reported profit margin of any service offered by UK firms, at 51%, yet only just over half of practices currently provide it.

Capacity remains a constraint for many. Nineteen per cent of firms said limited capacity was a barrier to offering advisory services, while three in five practices said they were directing AI-related time savings towards that work.

The data also suggests firms do not broadly expect AI to trigger staff cuts. Only 5% of UK practices said they expected AI to reduce headcount within the next year, indicating that most see the technology as a way to reallocate staff time rather than replace roles.

Kate Hayward outlined the broader patterns identified in the research.

"The qualities that define the successful modern practice are clear. We're seeing firms make more deliberate decisions over which clients to serve, how to build teams around them, which tools to use, and never letting billable work go untracked - all contributing to major gains across the industry. The data speaks for itself when it comes to AI. It's about freeing up time to bring this industry's most valuable skills to the surface, it's not about replacing people. The story here is what it allows firms to do next, whether that's advisory, deeper client relationships or growth. Our data shows that while AI accelerates the positive changes already underway, getting the essentials right has never been more important," said Kate Hayward, UK Managing Director, Xero.

Hiring shift

Beyond AI, the report argues that more profitable firms are reshaping hiring, team structures and pricing. Nearly two-thirds of firms, or 63%, said they are changing what they look for when recruiting.

Soft skills and relationship management were cited by 28% of respondents, while 27% pointed to technology fluency. Both ranked ahead of traditional accounting skills as firms reassess the mix of expertise needed within practices.

Top-performing firms were also more likely to recruit specialists not historically associated with accountancy practices. The survey found that 34% were hiring non-traditional roles such as data analysts and tax technologists, compared with 18% across the wider market.

That suggests a growing willingness among better-performing firms to widen the mix of expertise they bring into the business. The shift mirrors a broader change in professional services, where firms are looking beyond technical compliance work towards services that rely on analysis, communication and client management.

Pricing model

The research also highlights differences in how firms charge for work. Top performers charge more than a third extra for payroll alone, pointing to stronger use of retainer and value-based pricing rather than billing only for time spent.

Price rises are also more common among stronger performers. According to the findings, those firms were more than twice as likely to be planning an increase of more than 20%.

Among practices already using value-based pricing, two in five said it had made their firm more profitable. That adds to the report's broader argument that margins are shaped not only by software adoption but also by choices around service mix and commercial model.

Rachel Harris, Director of UK-based accountancy practice striveX, described how those operational changes have played out in her own business.

"Over the last five years, technology has powered my firm's growth engine and been a huge contributor to why we're now a multi-million pound business. Gaining access to AI is freeing my team up for higher-value work, now spending more time interpreting it for our clients. But it's mapping client journeys, each piece of software and every process my team touches along the way which has proven to be our best diagnostic tool. Any margin gained from having our team well set up to know when and how to reach for different tools is reinvested in our client relationships," said Harris.