Next warns UK economy anaemic growth as profits rise

Next warned that the UK economy is likely to show anaemic growth ahead of the Budget as it reported a 13.8% rise in pre-tax profits to £515m for the six months to the end of July. The fashion retailer, which operates more than 500 stores in the UK and Ireland, saw its shares fall about 6% in early trading.

Chief Executive Lord Wolfson, a Conservative peer, said the result reflected a period of relative resilience but underscored caution about the broader economy. In its results, the company quoted a cautious assessment: "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." The note highlighted that profits were boosted in part by the summer weather and disruption at rival Marks & Spencer after a major cyber attack, which temporarily supported its performance.

Next cautioned that sales growth is likely to slow as the economy worsens and consumer spending remains damped. It said it had previously warned about a potential weakening in UK employment, noting: "We first raised concerns about a potential weakening in UK employment in our report two years ago. 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 retailer also disclosed that store vacancies within the chain were down 35%, with steeper declines in frontline roles, though it stressed the business remained "in a good place, with multiple opportunities for growth, both in the UK and overseas."

Analysts and independent voices weighed in on the results. Clare Bailey, founder of the Retail Champion, said Next’s bumper profits were "amazing... considering the current climate," while pointing to broader challenges facing High Street retailers such as the collapse of Claire’s and Poundland. She cited headwinds including higher National Insurance costs, rising operating costs and wage pressures. Natalie Berg, a retail analyst, said Next was "one of the more resilient retailers" but warned the sector faces an inflationary surge that could limit investment in stores and staff and may be passed on to consumers in higher prices.

Next noted that its results keep the company on a path of growth opportunities in both the UK and international markets, even as it faces a tougher macro backdrop. The firm said the results come ahead of the government’s Budget plan due in November, when tax and spending priorities will be outlined. The comments illustrate how a prominent UK retailer sees policy and cost pressures shaping consumer demand and investment decisions in the months ahead.