Britain's Next warns against budget tax rises

By James Davey

LONDON, Sept 17 (Reuters) - British clothing retailer Next cut its forecast for UK second-half sales growth, warning that concerns over inflation, higher mortgage costs and a weak jobs market will be compounded if the government raises taxes in next month's budget.

Next, led by CEO Simon Wolfson, the longest-serving head of a FTSE 100 company, on Thursday lowered its forecast for UK sales growth in the six months through to January 2027 to 2.0% from 2.8%.

The UK accounts for about three quarters of Next's sales.

"Our primary concerns are rising inflation, higher mortgage interest costs and a weak employment market. These worries will only be compounded if they are accompanied by tax increases," it said.

New finance minister John Healey will present his first budget on October 28.

TAX RISES SEEN AS LIKELY

Next acknowledged the government has little room to stimulate growth through higher spending or to alleviate inflationary costs in fuel and energy.

"In fact, the reverse is probably true; it seems likely that it will have to increase taxes in order to fund its expenditure," Next said.

It warned that further tax rises could stifle growth, creating a "vicious circle" in which weaker growth further undermines government finances.

"The best outcome for UK growth would be a credible plan to get Government spending under control — eliminating the fear of higher taxes — alongside supply side measures to boost growth," it said.

British households will face higher energy bills in October, inflation rose in the latest data published on Wednesday, and rival John Lewis said last week that consumers were holding back on bigger-ticket purchases amid difficult trading conditions.

Next, which trades from more than 800 stores in the UK and Ireland and sells online in domestic and overseas markets, reported a 10.5% rise in profit before tax to £569 million ($762 million) for its first half to August 1.

Full price sales rose 7.7%, boosted by Britain's hot summer.

It expects group full-price sales growth to slow to 5.8% in its second half, up from a previous forecast of 5.0%, with slower UK growth more than offset by an expectation that international sales will increase 20.5%.

Next raised its full-year 2026/27 profit guidance by £12 million to £1.255 billion, reflecting the small sales upgrade and additional cost savings. It made £1.158 billion in 2025/26.

Shares in Next were last up 1%, extending 2026 gains to 10.4%. 

($1 = 0.7472 pounds)

(Reporting by James Davey. Editing by Sarah Young and Mark Potter)