Next Warns Against Tax Hikes, Citing Risk to Economic Growth
Fashion retailer Next upgrades profit forecast for the fourth time this year, but expresses concern over potential tax increases impacting consumer confidence.
Next, a prominent fashion retailer, has issued a warning against government tax hikes, suggesting they could stifle economic growth and worsen consumer confidence. The company, led by Lord Wolfson, announced its fourth profit upgrade of the financial year, underscoring its recent positive performance.
Wolfson stated that the current tax burden in the UK is at its highest level in over 60 years. He expressed concern that further increases risk hindering growth, which could, in turn, negatively impact government finances, creating a detrimental cycle. He advocated for a credible plan to control government spending and implement supply-side measures to stimulate growth, rather than relying on tax increases.
The retailer anticipates a modest slowdown in its UK sales growth for the remainder of the year. Next now forecasts a 2 percent sales growth for the final six months of 2026, a reduction from its previous projection of 2.8 percent. However, Wolfson described this as a "slow, steady decline" rather than a sharp downturn.
These remarks echo sentiments from other business leaders, such as Iceland boss Richard Walker, who urged against viewing businesses as a "piggy bank" to be continually raided through taxation. Retailers, including John Lewis and Frasers, have also previously expressed concerns about potential increases in business rates for large shops.
Despite the cautionary note on future growth, Next has demonstrated strong financial results. Pre-tax profits rose 10.5 percent to £569 million in the six months leading up to July. The company now projects annual profits to increase by 8 percent to £1.23 billion, an upward revision from its earlier forecast of 7.3 percent. Sales growth is now expected to reach 6.7 percent, driven by a 3.6 percent increase in UK full-price sales, with online growth of 7.4 percent offsetting a 1.7 percent decline in store sales.
Next also commented on its product development, with Wolfson noting that consumers prefer "the authentic creativity of human beings" over AI-generated designs, particularly in artwork and color. The company is focusing on designers using traditional techniques like painting and drawing. The retailer is also addressing challenges in its menswear segment, aiming for marked improvement by the second half of next year after revamping ranges that had become too focused on similar items.