KAREN JOY BACUDO

Finance Editor

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.

Gas network company SGN confirmed it had repaired three minor gas leaks and left the site on Monday, August 3, six days earlier than expected.

The leaks were discovered during excavation works last month and contributed to the pushing back of the road’s reopening date, yet again, to September 20.

The completion of the gas mains replacement marked a significant step forward in the wider Oxford Station improvement project, which was originally budgeted at £161 million but is now expected to cost at least £237 million.

The development prompted hopes that Botley Road, closed beneath the rail bridge since April 2023, could reopen earlier than planned.

However, Network Rail has moved to manage expectations, saying the project remains on course to meet its existing target date rather than finish ahead of schedule.

A Network Rail spokesperson said: “We’re pleased that SGN has completed its gas mains replacement work.

“While this is an important milestone, it doesn’t necessarily mean the overall project will finish early as some remaining work is dependent on access to the railway, which we have had to rearrange to enable the replacement of the gas main.

“Our focus remains on meeting our planned deadline of 20 September for reopening Botley Road to traffic.”

While the completion of the gas works removes one of the most recent obstacles facing the scheme, Network Rail says further work under the bridge and around the station is still needed before the route can reopen to traffic.

The club is currently struggling in the summer heat, and has launched a new fundraiser to keep its gymnasts safe.

The club, which is based at Grove House Barn near Warkworth in Banbury, launched the fundraiser so it could buy and install four air conditioning units to keep its space cool.

Currently, the club hopes to raise £7,000 through the appeal so it can buy four 10kW air conditioning units and cover all the installation costs.

So far, the club has raised £380.

Karl Wade, director of Wade Gymnastics, said the club has become “increasingly warm” during the summer months due to the rising temperatures.

READ MORE: Thames Water leakage targets are ‘not realistic’ says boss after pay rise

Wade Gymnastics at Grove House Barn in Banbury (Image: Google Maps)

“Despite our best efforts to keep doorways and shutters open, it becomes very uncomfortable for gymnasts to play and train,” Mr Wade said.

He added: “The safety of our gymnasts and coaches is always our utmost priority.

“Unfortunately, the risk of having to close the business during these hot spells is increasing and we need to have more effective ways of keeping everyone cool.

“An air conditioning system would allow the business to stay open during those extreme hot conditions and continue to provide classes for everyone who attends.”

The gym currently delivers classes seven days a week for around 900 people, which range from toddlers to athletes competing at national level.

The gym club was founded more than four decades ago by Ruth Wade and, for the past 20 years it has been based at its current facility.