Next has claimed the UK can expect “anaemic” economic growth and declining job opportunities due to the current level of taxes and government spending committments.
The warning from the fashion retailer, led by chief executive Lord Wolfson, a Conservative peer, comes as it reported a 13.8% rise in pre-tax profits to £515m for the six months to the end of July.
However shares in the business, which has more than 500 stores in the UK and Ireland, fell 6% on Thursday during the early trading.
The company said it did not believe the economy was “approaching a cliff edge” but the weakening forecast gave it “another reason to be cautious”.
In its results, the retailer said: “The medium to long-term outlook for the UK economy does not look favourable.
“To be clear, we do not believe the UK economy is approaching a cliff edge.
“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.”
It outlined a surge in half-year profits boosted by the summer weather and disruption at rival Marks & Spencer, which was caused by a major cyber attack.
However, Next expects sales growth to slow sharply due the economy outlook and dampened consumer spending.
“We first raised concerns about a potential weakening in UK employment in our report two years ago”, the company said.
“Since then, vacancies have continued to fall, and PAYE payroll numbers are now moving backwards.
“The problem appears to be that employment, particularly at the entry level, faces the triple pressure of rising costs, increasing regulation, and displacement through mechanisation and AI.”
The warning from the retalier comes ahead of the government outlining its tax and spending plans in the Budget in November.
Next said job vacancies within the chain were down 35% – with steeper falls within stores.
But it said the business was “in a good place, with multiple opportunities for growth, both in the UK and overseas”.
Independent retail expert Clare Bailey, founder of the Retail Champion, said Next’s bumper profits were “amazing… considering the current climate”.
She highlighted the challenges facing High Street retailers such as the collapse of Claire’s and Poundland.
“You’ve got all this pressure on an industry which is trying its best to survive,” she said. “National Insurance is a massive burden, rising costs, and the minimum wage increase.”
Retail analyst Natalie Berg said Next was “one of the more resilient retailers” but despite the surge in profits, the company was not immune to the “whole Tsunami of costs that have hit the sector”.
“They’ve been able to ride out the storm – but I think with these inflationary headwinds – that hinders a retailer’s ability to invest in stores, to invest in staff, and some of these costs will inevitably be passed on to consumers through higher prices.”
Credit: Source link
