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The boss of Next has warned of “anaemic” sales and profit growth this year as tax increases in the UK Budget hit one of the country’s largest retailers and the wider economy.
The FTSE 100 company on Tuesday laid out the impact from October’s Budget when chancellor Rachel Reeves increased the amount employers contribute in national insurance and also lowered the earnings threshold at which they start paying it.
“I think what’s being demonstrated at the moment is that tax rises are much more likely to reduce growth than increase it,” said chief executive Lord Simon Wolfson, who is a Conservative peer.
“We’re assuming that the growth will be anaemic in the year ahead as the economy has to absorb not insignificant tax rises.”
The measures, along with an increase in the national living wage and general wage inflation, would cost Next £67mn in the current financial year, the company said, as it warned of a potential chilling effect on the broader economy.
“Employer tax increases, and their potential impact on prices and employment” would begin to filter through into its sales growth, according to Next, which has 458 stores in the UK.
It expects UK full-price sales growth of 1.4 per cent in the next financial year, down from 2.5 per cent in the 12 months to December 28.
The retailer expects profit growth of 3.6 per cent for the year to January 2026, down from an estimated 10 per cent in the 12 months to January 2025.
Despite Next’s caution over the coming year, the retailer’s sales during the Christmas period exceeded the group’s forecasts.
Next’s full-price sales rose 6 per cent in the nine weeks to December 28, or 5.7 per cent when stripping out the impact of its end-of-season sale being timed differently to the previous year.
The figures exceeded Next’s previous guidance of a 3.5 per cent increase on the previous year and will push the chain’s pre-tax profit to just over £1bn for the year to January.
The retailer’s shares rose 3.3 per cent on Tuesday morning.
Next said the chancellor’s move to lower the earnings threshold at which businesses start to pay NI contributions from £9,000 to £5,000 was one of the most significant costs, totalling £20mn.
“I don’t object to the reduction of the threshold in principle,” said Wolfson. While the tax changes were not unfair, “the speed at which this is being done needs to be questioned”, he said, adding that “the slower the change happens, the less damage will be done”.
Next said it would try to offset these “unusually high” costs through operational efficiencies and by increasing prices by 1 per cent, “which is unwelcome, but still lower than UK general inflation”.
In a survey of 5,000 businesses by the British Chambers of Commerce published this week, about 55 per cent of companies said they were planning to increase prices in the coming three months.
Richard Chamberlain, a retail analyst at RBC Capital Markets, said he believed that Next would benefit from “further real wage growth in the UK, albeit it will remain somewhat sensitive to the outlook for the cost of borrowing for the consumer”.
