Next Warns UK Government Against Tax Hikes Amid Profit Upgrade

Fashion retailer Next has issued a warning to the UK government, urging against tax increases that could stifle economic growth and further dampen consumer confidence. The company, led by Lord Wolfson, announced its fourth profit forecast upgrade of the financial year, but expressed concern over potential tax hikes in the upcoming October Budget.

Wolfson stated that the tax burden in the UK is at its highest level in over 60 years, and further increases risk hindering growth. He posited that lower growth could consequently worsen government finances, creating a detrimental cycle. "In our view, the best outcome for UK growth would be a credible plan to get Government spending under control – eliminating the fear of higher taxes – alongside supply side measures to boost growth," Wolfson said.

Iceland boss Richard Walker echoed these sentiments, appealing to Andy Burnham to cease viewing businesses as a "piggy bank" to be constantly raided. Walker suggested that additional tax rises would negatively impact the economy, exacerbating concerns about inflation, rising mortgage rates, and a weak job market.

Despite these warnings, Next reported strong trading results. The company anticipates a modest reduction in its UK sales growth for the remainder of the year, forecasting 2 percent growth for the final six months of 2026, down from a previous estimate of 2.8 percent. Wolfson characterized this as a "slow, steady decline" rather than a sharp downturn.

Next's financial performance has impressed investors, with pre-tax profits rising 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. Full-price sales in the UK increased by 3.6 percent, driven by a 7.4 percent growth in online sales that offset a 1.7 percent decline in store sales.

The retailer also acknowledged areas for improvement, particularly in its menswear division, which it identified as a significant opportunity. Next has been working to revamp its menswear ranges, which it admitted had become too focused on similar items serving the same customer. A "marked improvement" is expected in the second half of next year.

In a separate note, Wolfson commented on the role of Artificial Intelligence in design, asserting that consumers prefer the "authentic creativity of human beings." He emphasized the importance of human designers and techniques like painting and drawing for creating compelling aesthetics, stating, "When it comes to artwork and colour, outstanding aesthetics require a human hand, creative eye and an emotional response."