Tax hikes drive UK businesses to bet on AI over new hires

As the UK gears up for increases in National Insurance and the minimum wage this April, businesses are reassessing their workforce strategies. Faced with mounting financial pressures, a growing number of firms are opting to invest in artificial intelligence rather than expand their teams, according to new research.

The CFO Playbook, a study commissioned by spend management platform Pleo, surveyed over 500 UK finance leaders and found that 57% of businesses are more likely to deploy AI solutions than hire new employees due to rising employment-related costs. The findings highlight a critical shift in corporate strategy as businesses attempt to balance efficiency gains with financial constraints.

A Costly Balancing Act

UK finance leaders are walking a tightrope between optimism and economic pressure. While 70% of respondents expressed confidence in their business performance for 2025, they also pointed to key fiscal challenges—42% cited inflation as a major concern, followed by high energy bills (36%) and increased business taxes (35%).

The result? Increased financial strain, with 76% of respondents saying they are experiencing unprecedented pressure while navigating macroeconomic uncertainties. Many are looking to AI as a potential solution, but the approach to implementation remains a pressing concern.

AI: A Productivity Boost or a Replacement Strategy?

AI adoption is accelerating, but not necessarily in ways that maximise its benefits. The report suggests that instead of using AI to complement human expertise, many businesses view it as a direct substitute for staff.

Nearly 60% of business leaders believe that leveraging AI is easier than motivating employees, a figure that jumps to 82% among companies that have already integrated AI extensively. Moreover, 68% of respondents warned that rising employee-related taxes could force them to pass cost increases on to customers, further incentivising automation over hiring.

While AI has the potential to streamline operations, businesses risk mismanaging its integration. “As we move into 2025, businesses will continue to face uncertainty,” says Pleo CFO Søren Westh-Lonning. “But learning to manage uncertainties requires financial stability, not financial guesswork.”

Digital Overload and Implementation Pitfalls

Despite the growing enthusiasm for AI, many companies are grappling with ineffective adoption strategies. The report highlights that 47% of finance leaders say digital overload is pushing them back towards traditional tools like spreadsheets, while 52% report that their companies are struggling with an overabundance of disconnected software solutions. Poor implementation is a major culprit—72% of leaders say integration challenges cause frustration and waste time.

On average, finance professionals are losing 123 hours annually—equivalent to over three working weeks—switching between tools that fail to communicate effectively.

“To remain competitive, organisations must empower their finance teams to become change-makers across the business and to pioneer financial stability,” says Westh-Lonning. “AI can make this balance possible, but this does not mean leaders should embrace it blindly.”

Finding the Right Balance

While AI is reshaping finance operations, it is not a panacea. The key to success lies in strategic implementation that enhances—rather than replaces—human decision-making.

Encouragingly, 70% of UK leaders say they will prioritise AI and tech skills when hiring finance professionals, while 71% believe AI can free up CFOs and finance teams from administrative burdens, allowing them to focus on high-level strategy.

However, organisations must ensure that their technology choices align with business objectives. Finance leaders emphasise the need for visibility and integration, with 73% stating that a single, consolidated view of accounts, currencies, and financial data is crucial. Without a clear implementation plan, businesses risk replacing one set of inefficiencies with another.