The boss of one of the UK's largest software groups said more businesses will replace workers with artificial intelligence (AI) as tax hikes announced in the UK Budget leave them searching for ways to cut costs, writes Calum Muirhead.

Steve Hare, chief executive of Sage, says companies looking to use AI to boost productivity would now step up their efforts.

"That trend towards a more digital economy was already there but in many ways, this [the Budget] accelerates it," he said.

Newcastle-based Sage provides companies with software that makes it easier to manage their accounts.

The firm has been using AI-powered tools for several years and this year unveiled Sage Copilot, an AI assistant based on the same technology as chatbots like ChatGPT.

Hare stressed that Sage did not want to replace staff with robots but instead use its tools to "elevate the work of humans".

"We are using machines to help our customers be more efficient and allow them to spend their time where they think it is best to grow their business," he added.

The comments came as Sage shares hit a record high - up 17.9pc, or 192.5p, to 1269.5p - after a 43pc rise in profit to £452m for the year to September on the back of strong demand.

The group also cheered investors by unveiling plans to buy back £400m of its own stock.

Business leaders and analysts have warned that the rise in costs due to the Budget would lead to increased AI use and automation, putting jobs at risk.

Retailers and hospitality firms are particularly vulnerable as lowering the threshold at which employers begin to pay National Insurance Contributions from £9,100 to £5,000 hits their ability to hire lower-paid workers.

At the same time, UK Chancellor Rachel Reeves raised the rate from 13.8pc to 15pc.

Investment bank RBC Capital Markets said last week it could mean more selfscan checkouts at supermarkets.

Earlier this month Allison Kirkby, the boss of telecoms giant BT, warned the company would go "harder and faster" with cost-cuts to counter the tax increase, including more AI and automation to improve productivity.