Retail Giant Warns of Sales Growth Slowdown and Higher Prices After Budget Changes

A Christmas themed logo of clothing retailer Next is seen at a store in London, on Dec. 2, 2021. May James/Reuters

British multinational retailer Next expects slow sales growth in the new financial year, citing Budget measures among the reasons that will also push up prices for consumers.

One of the largest fashion and lifestyle retailers in the UK, Next has warned that prices will increase by one percent and sales will decrease sharply as a result of government policies set to take effect in April.

Faced with a £67 million surge in its wage costs in the year to January 2026, Next join the growing list of British brands cautioning of an upcoming surge in prices to address the rising business expenses.

Some 55 percent of firms, recently surveyed by the British Chambers of Commerce (BCC), have said prices will increase owing to rising labour cost pressures.

Policies announced by Chancellor Rachel Reeves in October are set to drive an increase in business costs. These will take effect in three phases over the next year.

The higher employment costs via employer National Insurance Contributions (NIC) and National Living Wage hikes will come into force from April. In July, new costs from changes to border operations will take effect, while the advanced Extended Producer Responsibility for Packaging initiative will drive up the costs of managing packaging waste from October.

“We believe that UK growth is likely to slow, as employer tax increases, and their potential impact on prices and employment, begin to filter through into the economy,” Next said.

Tax Concerns

Next competes with other major UK retailers such as Marks & Spencer, John Lewis, Primark, and H&M. In November, the retailer joined Marks & Spencer, Primark and other firms to address Reeves with concerns over the impact of the Budget measures on the industry.

They warned that the total cost to the sector could rise by up to £7 billion a year and lead to job losses and higher prices for shoppers.

The government has defended its decision, citing the need to rescue deteriorating public services and the significant financial deficit of £22 billion when it took office.

The BCC called on ministers to accelerate business rates reform and “create a system that incentives investment” to address taxation concerns among UK businesses looking ahead.

Sales Growth

Over the next financial year to January 2026, Next expects sales growth to slow to 3.5 percent and for the group’s profits to rise by a more muted 3.6 percent to £1.05 billion.

This follows a better-than-expected 5.7 percent rise in underlying full-price sales for its fourth quarter so far.

The retailer’s overseas sales growth enjoyed a 24 percent surge in 2024-2025, but is expected to fall back as it reins in marketing spend after investing heavily in this over the past year.

“We do not believe we can profitably increase our overseas marketing expenditure by the same percentage next year, and expect the growth to be closer to 20 percent,” Next said.

Impact on Employment

As the full effects of the Budget are felt by businesses, Next warned that employers with part-time and low wage workers will be disproportionately affected.

“We’re not looking at a dramatic increase in unemployment but… it’s these jobs that are most likely to be lost in the economy,” the retailer’s chief executive and Conservative peer Lord Simon Wolfson.

Next plans to address the hike in business costs with a combination of prices increases, efficiencies and cost savings. It expects the one percent increase in prices to offset around £13 million of its higher wage bill.

Wolfson said that Next has no plans to cut jobs through redundancies but confirmed the retailer will hire fewer workers than usual in the coming year for its warehouses and retail stores.

This reduction will partly result from the introduction of high-tech warehouses, while some positions will not be refilled when employees leave. However, that the company’s overall workforce numbers will remain steady, Wolfson added.

PA Media contributed to this report.