The chief executive of Next has issued a stark warning about “anaemic” sales and profit growth for the coming year, as tax increases from the UK Budget begin to impact one of Britain’s largest retailers and the broader economy.
Lord Simon Wolfson, CEO and Conservative peer, expressed concerns over the October Budget decisions, where Chancellor Rachel Reeves increased employer national insurance contributions and reduced the earnings threshold. “Tax rises are much more likely to reduce growth than increase it,” Wolfson stated, highlighting the challenging economic landscape ahead.
The FTSE 100 retailer revealed the combined impact of these measures, alongside increases in the national living wage and general wage inflation, would result in a £67 million cost burden for the current financial year. The company’s outlook suggests UK full-price sales growth will decline to 1.4 per cent in the next financial year, down from 2.5 per cent in the previous period.
Despite these headwinds, Next delivered strong Christmas trading figures, with full-price sales rising 6 per cent in the nine weeks to December 28. This performance exceeded the group’s previous guidance of a 3.5 per cent increase, pushing pre-tax profits towards the £1 billion mark for the year to January.
The retailer plans to navigate these challenges through operational efficiencies and a modest 1 per cent price increase, which remains below the UK’s general inflation rate. The British Chambers of Commerce reports that approximately 55 per cent of businesses are contemplating price increases in the coming quarter.
Market analysts remain cautiously optimistic, with RBC Capital Markets suggesting Next could benefit from continued real wage growth in the UK, though consumer borrowing costs remain a key consideration for the retailer’s outlook.
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