Next issues alert regarding the UK's rising unemployment problem

Next Issues Caution Over Impact of Rising Unemployment on Sales

Next has cautioned that the growing unemployment situation in the UK is likely to negatively affect its business, as households facing job losses are expected to cut back on their spending.

The well-known retailer anticipates a notable slowdown in sales growth next year, projecting a drop from 10.6% in 2026 to just 4.5%.

According to Next, this deceleration is partly due to ongoing challenges in the UK job market, which are expected to increasingly affect consumer spending as the year goes on.

Unemployment rates have climbed sharply in recent months, reaching a four-year high of 5.1% in October. Job vacancies have also decreased significantly, falling to 729,000 in November compared to 1.3 million at the start of 2022.

Industry groups have attributed the rise in unemployment to Labour’s policies, including a £25 billion hike in employers’ National Insurance contributions and substantial increases in the minimum wage.

Additionally, some businesses are reportedly dismissing underperforming employees ahead of new Employment Rights Act provisions, which will make it more difficult to terminate staff.

Lord Wolfson, Next’s chief executive, is among several business leaders voicing concerns about the upcoming changes to workers’ rights.

In September, Lord Wolfson warned that these reforms could “unnecessarily prevent millions of part-time workers in the UK from having the flexibility to boost their earnings.”

Next’s alert about slowing sales growth is likely to unsettle investors, as the company is often seen as an indicator of the wider retail sector’s health.

Retail Sector Faces Mounting Challenges

Signs of trouble for retailers are increasing. Claire’s Accessories, a jewellery chain, is preparing to enter administration for the second time in six months, with its private equity owner Modella blaming government policies for its financial struggles.

Recent official data reveals that household disposable income has fallen to its lowest point since before the pandemic, following a series of tax increases introduced by Rachel Reeves.

Chancellor Rachel Reeves has rejected suggestions that her policies are contributing to the jobs crisis, insisting there is no connection between tax hikes and unemployment.

Next Reports Strong Holiday Performance Despite Concerns

Despite its warning about future sales growth, Next reported better-than-expected trading during the festive season.

The retailer, which operates around 900 stores, saw UK full-price sales rise by 5.9% in the nine weeks leading up to December 27, while international sales jumped by 38.3%.

Next now forecasts pre-tax profits to increase by 13.7% to £1.15 billion for the financial year ending in January, slightly above its previous estimate of £1.14 billion.

The company commented, “Growth in the UK slowed, but not as much as we had anticipated.”

Strong Christmas sales helped push Next’s shares to the top of the FTSE 100, with an early trading gain of nearly 2.5%.

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