Fashion giant Next has warned that the UK economy faces years of “anaemic” growth, squeezed job opportunities and weak productivity, despite reporting a sharp rise in profits.
Profits Surge But Shares Fall
The retailer, led by chief executive Lord Simon Wolfson, posted a 13.8% rise in pre-tax profits to £515m for the six months to the end of July. Sales were boosted by warm summer weather and disruption at rival Marks & Spencer following a major cyber attack.
But shares in Next dropped more than 6% in early trading on Thursday, as the company cautioned that the outlook for consumer spending remains fragile.
Next, which operates more than 500 stores in the UK and Ireland, said it was not predicting an imminent downturn but warned that the country’s medium- and long-term prospects looked weak.
Four Factors Holding Back Growth
In its results statement, Next said:
“At best we expect anaemic growth, with progress constrained by four factors: declining job opportunities, new regulation that erodes competitiveness, government spending commitments that are beyond its means, and a rising tax burden that undermines national productivity.”
The company added that while it did not believe the UK economy was “approaching a cliff edge”, the weakening forecast gave it “another reason to be cautious”.
Employment Concerns
Next said it first flagged worries about weakening job creation two years ago. Since then, job vacancies have steadily fallen, with PAYE payroll numbers now also moving backwards.
The company said vacancies within its own business were down 35%, with steeper falls across its store network.
It highlighted three main pressures on entry-level employment: rising costs, heavier regulation, and job displacement through mechanisation and artificial intelligence.
These warnings come just weeks before the government outlines its tax and spending plans in the November Budget.
Industry Under Pressure
Despite the economic backdrop, analysts praised Next’s resilience. Clare Bailey, founder of consultancy the Retail Champion, said the retailer’s £515m profit was “amazing… considering the current climate”.
She noted that other High Street names such as Claire’s and Poundland have collapsed in recent months. “You’ve got all this pressure on an industry which is trying its best to survive,” she said, pointing to higher National Insurance, rising costs, and minimum wage increases.
Retail analyst Natalie Berg also described Next as one of the sector’s stronger performers but warned that it faced the same cost pressures as others.
“They’ve been able to ride out the storm,” she said. “But with these inflationary headwinds, it hinders a retailer’s ability to invest in stores and staff. Some of these costs will inevitably be passed on to consumers through higher prices.”
Growth Opportunities Remain
Despite its gloomy warning about the UK economy, Next said its own business remained well positioned for growth, both domestically and abroad.
The company has successfully built a strong online presence, complementing its store portfolio, and is expanding through partnerships and international operations.
Lord Wolfson, who has led the company since 2001, has earned a reputation for cautious but effective management, steering the group through decades of changing consumer habits and economic turbulence.
For now, Next’s strong profits have underlined its resilience. But its warning that high taxes, regulation and falling job opportunities are undermining national productivity adds to the growing pressure on the government ahead of November’s Budget.
