High street retailer Next has cautioned that its UK growth rate is expected to slow this year due to the impact of tax increases introduced in the Budget. The company attributed the slowdown to changes in national insurance contributions and other cost pressures, which it says will affect prices and employment across the economy.
Despite these challenges, Next forecasts its annual profit before tax will rise by £5 million to just over £1 billion for the year ending January, supported by strong full-price sales during the festive season. However, UK full-price sales growth is projected to decline to 1.4% in the next financial year, compared to 2.5% in the previous year.
The FTSE 100-listed retailer, which operates 458 UK stores alongside a strong online presence, expects a £67 million cost hit from the combination of employer national insurance hikes, the rise in the national living wage, and broader wage inflation. One significant expense is the government’s decision to lower the threshold at which businesses start paying national insurance contributions from £9,000 to £5,000, costing the company an estimated £20 million.
To mitigate these “unusually high” costs, Next plans to implement operational efficiencies and increase prices by 1%. While acknowledging this measure is “unwelcome,” the retailer noted that it remains below the UK’s general inflation rate.
Retail analyst Richard Chamberlain of RBC Capital Markets suggested that Next could still benefit from “further real wage growth in the UK,” although the company remains sensitive to changes in consumer borrowing costs.
Next reported a 6% increase in full-price sales during the nine weeks leading up to December 28, exceeding its previous guidance of a 3.5% rise. Even after accounting for changes in the timing of its end-of-season sale, sales grew by 5.7% year-on-year. The retailer forecasts profit growth of 3.6% for the year ending January 2026.
