UK accountants adopt AI hybrid model to ease staff shortages

UK accounting firms are increasingly adopting hybrid operating models that combine AI with outsourced teams, according to Datamatics Business Solutions.

The shift comes as the sector faces a capacity shortfall that could be worth £2-4 billion in unrealised annual revenue.

Accounting practices are under pressure from a shortage of skilled staff and a rise in compliance work linked to tax and reporting changes. The strain is limiting firms' ability to take on more assignments even as demand remains strong.

Research from the Association of Chartered Certified Accountants found that 74% of firms cannot increase billable work because they lack enough skilled staff, while 45% reported severe shortages. Meanwhile, HM Revenue & Customs estimates that about 2.9 million taxpayers will move to more frequent digital submissions as Making Tax Digital is rolled out between 2026 and 2028.

Together, these pressures are widening the gap between the work firms could win and the work they can deliver. Datamatics estimates the UK accounting market is worth close to £40 billion a year, meaning even a modest capacity gap could leave billions of pounds in fees unrealised.

Hybrid shift

Many firms are responding by changing how routine work is handled. Datamatics describes a model that combines software tools with offshore or overseas delivery teams for compliance-heavy tasks, while UK-based staff focus more on advisory and client-facing work.

The company says it works with more than 150 UK accounting firms, including several Top 20 practices, and more than 250 firms worldwide. It also says it processes more than 800,000 hours of accounting work each year.

Some firms using this model have recorded efficiency gains of up to 50% in workflows including bookkeeping, reconciliations and tax preparation, according to Datamatics. The company also says demand from UK firms for its services has grown by about 50% since 2022.

The broader challenge for the profession is maintaining service levels as regulatory obligations increase and recruitment remains difficult. Smaller and mid-sized firms in particular are under pressure as junior hiring pipelines, which have traditionally supported large volumes of compliance work, come under strain.

Datamatics Chief Executive Officer Kartik Nagarajan said he was hearing the same message from firms across the country.

"In conversations I'm having every week with partners, CFOs and finance leaders across the UK, the challenge is consistent - firms have more demand than they can deliver, but not enough capacity to execute. Talent shortages are the primary driver. Firms are struggling to hire and retain the volume of junior staff needed to sustain traditional models, while compliance workloads are increasing. That's what is pushing firms to look for alternative ways to scale, and it's reflected in what we're seeing directly - our UK business has grown by around 50% since 2023 as firms turn to us to help bridge that gap," Nagarajan said.

Process redesign

He said the firms making the biggest changes were not relying on a single lever. Instead, they were redesigning workflows so automation and external delivery teams worked together in a more structured way.

"What's important is that this isn't just about outsourcing or adopting AI tools in isolation. The firms seeing real impact are those that are redesigning their operating model - combining AI with global delivery in a structured way. That means standardising workflows, automating high-volume processes like bookkeeping and reconciliations, and executing them at scale with the right level of human oversight. That's how you move from incremental improvement to a step-change in capacity," Nagarajan said.

The use of external teams in accountancy is not new, but pressure on staffing and compliance has made it more central to how some firms plan growth. Making Tax Digital is expected to add to that pressure by increasing the frequency of submissions for millions of taxpayers, raising the volume of recurring process work.

For firms that can shift that workload more efficiently, the immediate effect may be faster turnaround times and more room for advisory work, which tends to generate higher fees. That is one reason hybrid models are attracting more attention across the profession.

"When this model is implemented properly, the results are immediate. We're seeing efficiency gains of up to 50% in core workflows, but more importantly, firms are unlocking capacity - taking on more work, improving turnaround times, and reallocating their teams toward higher-margin advisory. That's the real shift. Growth is no longer constrained by headcount, and firms that adopt this approach are building a much more scalable and resilient business model for the future," Nagarajan said.