Next warns of years of slow growth as taxes and regulation bite UK economy

Retail giant Next has sounded the alarm on the UK’s economic outlook, stating that the nation faces a prolonged period of slow growth due to mounting tax burdens and tightening regulation. Announcing its results for the six months to July, the FTSE 100-listed retailer reported a 10.3 percent year-on-year increase in sales, reaching £3.3bn, and an 18 percent rise in statutory pre-tax profits to £509m. Despite these robust figures, shares dipped as much as 6 percent, making Next the day’s biggest faller on the FTSE 100 amid concerns over broader economic conditions.

Speaking to journalists, chief executive Simon Wolfson expressed caution, arguing that government spending, higher taxes, and new regulations are creating obstacles for both businesses and employment. Although Wolfson stopped short of predicting a major economic downturn, he emphasised that the medium- to long-term economic outlook remains unfavourable, noting constraints on growth from declining job opportunities and an environment that hampers productivity.

Next attributed some of its recent success to warm weather in spring and early summer, as well as operational disruption at rival Marks & Spencer following a major cyber-attack. The retailer observed that consumers were prioritising quality over quantity, purchasing fewer items but opting for better value products. Despite upbeat headline numbers, Next pointed out that job vacancies at the company have dropped by 35 percent over the past two years, mainly due to improved staff retention, while job applications have increased by 76 percent in the same timeframe.

Wolfson highlighted rising automation and artificial intelligence as double-edged swords for the economy. While these technologies promise cost reductions and greater efficiency, they also risk reducing the availability of entry-level roles, potentially limiting opportunities for those entering the job market or seeking new positions.

The recent reintroduction of the Employment Rights Bill to Parliament also drew criticism from Wolfson. The legislation proposes to ban zero-hours contracts, stop fire-and-rehire practices, and entitle workers to sick pay from their first day on the job. Wolfson warned that depending on how the rules are defined, it could restrict Next’s ability to offer additional hours to part-time staff during peak trading periods, such as students and parents who rely on flexible shifts.

Despite the retailer’s concerns about the business environment and the broader UK economy, analysts at Peel Hunt highlighted the company’s strong execution and noted upgrades in each quarter. They commented that while significant challenges remain, there is growing confidence in Next’s strategy and ability to adapt. Shareholders are set to benefit from a further £99m dividend, equal to 87p a share, underlining the company’s ongoing resilience despite the challenging context.