Louise Coleman, Chief Membership Officer, ICAEW
Understanding sole practitioners and small firms
Sole practitioners and small firms share a strong foundation in accounting, tax compliance, bookkeeping and payroll, but differ in staffing, client base and service mix. Both see the greatest opportunities in expanding established advisory services, particularly tax advice and financial planning, rather than launching entirely new offerings.
Stability, rather than transformation, is the dominant theme across operating models. Most firms expect little change in areas such as trainee numbers, offshoring and outsourcing over the next three years, although some small firms anticipate increasing professional staff below principal level.
Talent remains a challenge for some, particularly succession planning, recruiting qualified staff and managing changing workforce expectations.
Despite their different operating models, firms share many of the same concerns about trends impacting the profession. Regulatory and compliance change, UK economic and public policy factors and the impact of generative AI emerge as the most significant forces across all firms.
AI and technology
The impact of generative AI is one of the most significant macro trends affecting the profession. Many firms expect their use of AI and automation to increase and sole practitioners are generally behind small firms in their AI adoption.
Current use is moderate, with internal knowledge management and/or technical research among the more established applications. Better integration with existing software, practical training, greater confidence around data and cyber security, and clearer guidance on selecting tools would help firms progress.
Technology adoption is more advanced than AI adoption and, again, sole practitioners lag behind small firms in their adoption.
The use of specialised software is firmly embedded across core service lines such as tax, accounts production and payroll. Small firms are more likely to make wider use of specialised software across practice management, client onboarding and operational processes than sole practitioners. All firms highlighted the importance of easier integration between software providers and more flexible licensing arrangements as important drivers of increased use, or confidence in using, specialised software.
Confidence in cyber preparedness is reported as uneven, particularly among sole practitioners highlighting an important area for future support and capability building.
Growth
Growth prospects are mixed across sole practitioners and small firms. Small firms are generally more optimistic, with many reporting fee growth in the last financial year and expecting revenues to increase further over the next three years, although a notable group of sole practitioners are also growing.
For firms experiencing fee growth, new client acquisition is the primary driver, supported by increased charge-out rates and greater spending from existing clients.
Most firms expect their operating models to remain broadly stable, but growing firms are more likely to plan increases in staffing, trainee numbers, specialist expertise and their use of automation and AI.
Regulation and government policy are the most significant constraints on growth. Firms expecting static or declining revenues frequently cite the volume and complexity of regulation and government policy decisions. The specific pressures vary by firm size, with sole practitoners mainly citing Making Tax Digital and anti-money laundering requirements. Meanwhile, small firms with five or more principals highlight workforce costs and audit regulation.
Structural shifts in the practice landscape
Merger and acquisition (M&A) activity is evident across this segment of the profession but remains relatively modest. Activity increases with firm size, with small firms with five or more principals the most actively engaged and the most likely to pursue further activity in the next three years.
Views on the longer-term impact are divided. Just under one-third of firms expect a more polarised market by 2030, with fewer large firms, more small firms and a diminished middle. Meanwhile just over one-fifth disagree.
Private equity interest is also concentrated among small firms with five or more principals. A significant majority of these firms have been approached by an investor and around one-fifth see private equity investment as a potential future option. Despite its growing presence in the sector, sentiment is largely negative with only 5% believing private equity investment benefits the sector overall.
More than half of sole practitioners are pursuing or considering a sale, wind-down or another exit route, compared with one third of small firms. Most plans remain at the consideration stage; meaning outcomes are not certain. While retirement is the primary driver among sole practitioners planning an exit, the increasing complexity and volume of regulation is also a significant factor.
Research methodology
The survey was sent to Practising Certificate holders at more than 9,000 firms with up to 11 principals, with one response permitted per firm. Fieldwork took place in August 2026 and achieved an 8% response rate.
Responses came from sole practitioners, small firms with up to four principals, and small firms with five or more principals, broadly reflecting the composition of the wider firm population.
If you wish to discuss the research findings or methodology further, please contact kat.hearn@icaew.com.
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