Next warns against growth-‘stifling’ tax rises in Budget

Next has cautioned that further tax hikes in the upcoming UK Budget could stifle growth, citing consumer pressure from inflation and a cooling labour market. The retailer upgraded its profit outlook after stronger-than‑expected first‑half sales, noting rising online performance but a dip in physica…

Thu, 17 Sep 2026 06:57:05 GMT

Retail giant Next has issued a warning to the UK Treasury, arguing that additional tax increases in the forthcoming Budget could choke economic growth. The company said that consumers are already feeling the squeeze from rising inflation, higher mortgage costs and a weak job market. It added that the current tax burden is the highest in over six decades and that any further hikes would risk stifling growth, creating a vicious cycle that could worsen government finances.

First‑Half Performance Outperforms Expectations

Next released its first‑half results earlier this month, showing stronger than expected performance both domestically and internationally. UK full‑price sales grew by 3.6%, driven largely by a 7.4% rise in online sales, which offset a 1.7% decline in physical store sales. International online sales surged 23.9% despite price increases in some markets, a trend that was partly attributed to the Middle East conflict.

Underlying pre‑tax profits for the six months to July rose 10.5% to £569 million, while statutory pre‑tax profits increased 11.2% to £566 million. The company lifted its full‑year profit forecast to an 8% rise, expecting earnings of £1.23 billion, and raised its sales growth target to 6.7% from the previously expected 7.3%.

Tax Concerns and Growth Strategy

Chief Executive Lord Simon Wolfson said, “These worries will only be compounded if they are accompanied by tax increases.” He warned that the current tax level is at a point where further increases could stifle growth, which in turn could worsen the fiscal deficit. Wolfson added that the best outcome for UK growth would be a credible plan to bring government spending under control, eliminating fears of higher taxes, alongside supply‑side measures to boost growth.

Wolfson highlighted that the tax burden has reached its highest level in more than 60 years and that the government should focus on controlling spending rather than raising taxes. He suggested that a combination of fiscal prudence and supply‑side reforms would create a more conducive environment for businesses and consumers alike.

Impact on Consumers and the Retail Sector

Next’s comments come amid a broader context of inflationary pressures and a cooling labour market. The retailer noted that consumers are already feeling the impact of higher living costs, including mortgage payments and general price increases. The company’s warning is aimed at ensuring that the retail sector, which plays a significant role in the UK economy, does not face additional burdens that could dampen consumer spending.

While the company’s sales growth remains positive, the decline in physical store sales signals a shift in consumer behaviour towards online channels. The surge in international online sales also indicates that consumers are seeking value and convenience beyond the UK market.

What Happens Next?

Next’s stance will likely influence discussions in the upcoming Budget, as policymakers weigh the trade‑off between tax revenue and economic growth. The company’s emphasis on controlling government spending and implementing supply‑side reforms may resonate with other businesses that are concerned about the fiscal environment.

As the UK government prepares its Budget, it will need to address the concerns raised by major retailers like Next. The outcome will determine whether the country can maintain growth momentum while managing public finances.

Key Takeaways

• Next warns that further tax hikes could stifle UK growth amid inflation and a weak job market.
• The retailer upgraded its profit outlook after stronger-than‑expected first‑half sales.
• Online sales grew 7.4% in the UK, while physical store sales fell 1.7%.
• International online sales jumped 23.9% despite price increases in some markets.
• Next calls for fiscal restraint and supply‑side reforms to support growth.

Frequently Asked Questions

• Why is Next concerned about tax increases? The company believes that higher taxes could further dampen consumer spending and slow economic growth.
• What was Next’s profit outlook for the full year? The retailer now expects an 8% rise in profits, targeting £1.23 billion.
• How did international sales perform? International online sales increased 23.9% in the first half, showing resilience despite price hikes.
• What does Next suggest for the UK government? It recommends controlling spending and implementing supply‑side measures to boost growth.

Why it matters

Next’s warning highlights the delicate balance between fiscal policy and economic growth, underscoring how tax decisions can directly affect consumer spending and the retail sector’s performance.

Key points

• Next warns that further tax hikes could stifle UK growth
• Retailer upgraded profit outlook after strong first‑half sales
• Online sales outpaced physical store sales
• International online sales surged 23.9%
• Company urges fiscal restraint and supply‑side reforms

Frequently asked questions

Why is Next concerned about tax increases?

The company believes that higher taxes could further dampen consumer spending and slow economic growth.

What was Next’s profit outlook for the full year?

The retailer now expects an 8% rise in profits, targeting £1.23 billion.

How did international sales perform?

International online sales increased 23.9% in the first half, showing resilience despite price hikes.

What does Next suggest for the UK government?

It recommends controlling spending and implementing supply‑side measures to boost growth.

Reporting drawn from

• independent.co.uk