Xero links AI use to higher margins at UK accounting firms

Xero research based on a survey of 520 independent senior accountants and bookkeepers across the UK links embedded AI use with stronger profitability. Top performers are defined as firms with net profit margins of 41% or above, and the most profitable practices had net profit margins more than twice those of lower-margin peers.

Across all surveyed practices, AI saved an average of 7.1 hours a week, valued by respondents at about GBP £108,000 a year in staff time. Firms that had embedded AI into daily workflows reported average savings of 10.6 hours a week and an estimated GBP £202,000 a year. Process discipline also separated adopters from non-adopters: 87% of practices actively using AI in daily workflows said core processes were well documented and regularly updated, compared with 18% of practices not planning to use AI.

The freed capacity is being directed toward advisory services, which had the highest reported profit margin of any service at 51%. Xero said only 5% of UK practices expected AI to reduce headcount within the next year, suggesting most firms see the technology as a way to shift staff into higher-value work rather than cut roles.

More profitable firms are also changing recruitment, team structures and pricing, with greater emphasis on soft skills, relationship management, technology fluency and specialist roles such as data analysts and tax technologists. Pricing is shifting toward retainer and value-based models, with firms using value-based pricing reporting improved profitability.