Britain Braces for Sluggish Economic Development Over the Coming Year Due to Increasing Tax Burden, According to the New Leader
Next Warns of Challenging Economic Outlook as Profits Soar
In a concerning development for the UK economy, the chief executive of high street retailer Next, Lord Wolfson, has expressed a pessimistic outlook for the long term. According to Wolfson, the economic forecast does not look favourable.
This gloomy prediction comes as Next's profits soared by 13.8% to £515million in the first six months of the year, with group sales increasing by 10.3% to £3.25 billion. The retailer hailed this uptick in its performance, attributing it to favourable weather, major disruption at M&S, and impressive international growth.
Equity analyst Aarin Chiekrie of Hargreaves Lansdown noted that Next breezed past its original sales guidance over the first half. However, Chiekrie's comments did not indicate a drop-off cliff edge for Next's performance. Instead, he expressed concerns about a rising tax burden that undermines national productivity.
Next is considered a bellwether for the UK retail sector and consumer spending. Its analysis suggests a material squeeze on UK employment due to rising costs, mechanisation, AI, and new legislation. This aligns with Lord Wolfson's warning about another year of 'anaemic' economic growth and falling employment in Britain.
In response to these concerns, the government is considering fiscal measures to stimulate economic growth and employment. These measures include accelerated depreciation for investments, reductions of VAT in the gastronomy sector, lowering electricity taxes for manufacturing, reduced grid charges, and an increase in the commuter allowance. The fiscal impulses are expected to amount to 9 billion euros in 2025 and increase in the following years.
Despite Next's strong performance, the company stuck to its annual guidance for profits to rise 9.3% compared to last year, with profits set to top £1.1billion. This makes Next one of only five listed UK store chains to have raked in £1 billion in profits in a single year, alongside Tesco, Marks & Spencer, B&Q owner Kingfisher, and Next.
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Businesses have been urging the Chancellor to rule out further tax hikes at the 26 November Budget. Next, like many other companies, appears unimpressed by the current government's performance, which has brought about declining job opportunities, unfavourable regulation, unsustainable government spending, and rising taxes that make it harder for the economy to grow.
Next's shares slumped more than 6% in early trading to 11,265p, possibly reflecting investors' concerns about the long-term economic outlook. However, for the time being, the fashion powerhouse continues to thrive, setting a strong example in the UK retail sector.
