Next warns of slowing growth in the UK after the Budget tax increase

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Next has warned that its sales and profit growth will slow this year as tax rises in the UK Budget hit one of the country’s biggest retailers and the wider economy.

The FTSE 100 on Tuesday showed the impact of the October Budget, when Chancellor Rachel Reeves increased the amount employers contribute to National Insurance and also lowered the earnings threshold at which they start paying it out.

Next said these measures, along with increases in the National Living Wage and general wage inflation, would cost it £67 million in the current financial year, as it warned of the potential negative impact on the wider economy.

“Tax increases on employers, and their potential impact on prices and employment” will begin to trickle down to its sales growth, according to Next, which has 458 stores in the UK.

It expects full-price sales in the UK to grow by 1.4 per cent in the next financial year, down from 2.5 per cent in the 12 months to December 28.

The retailer expects profit growth of 3.6 per cent for the year to January 2026, down from the 10 per cent estimated in the 12 months to January 2025.

Despite Next’s cautious approach over the coming year, the retailer’s sales over the key Christmas period exceeded the group’s expectations.

Next’s full-price sales rose 6 percent in the nine weeks to December 28, or 5.7 percent when excluding the impact of end-of-season sales that were timed differently from the previous year.

The figures beat Next’s previous guidance of a 3.5 per cent increase on the previous year and will push the chain’s pre-tax profits to just over £1bn for the year to January.

Next shares rose 2.7 percent in early trading.

the next He said the Chancellor’s move to lower the earnings threshold at which companies start paying National Insurance contributions from £9,000 to £5,000 was one of the most significant costs, totaling £20 million.

It said it would try to offset these “extraordinarily high” costs through operational efficiencies and a 1 per cent price increase, “which is not welcome, but is still below general UK inflation”.

In a survey of 5,000 companies conducted by the British Chambers of Commerce and published this week, about 55 per cent of companies said they were planning to Price increase In the next three months.

Richard Chamberlain, a retail analyst at RBC Capital Markets, said he believed Next would benefit from “further real wage growth in the UK, although it will remain somewhat sensitive to expectations around the cost of consumer borrowing”.