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

As retailer Next warns against tax increases in next month’s Budget, flagging concerns that consumers are already impacted by the rising cost of living, increased mortgage costs and a weak jobs market, Susannah Streeter, chief investment strategist at Wealth Club agrees that further taxation would add to the strain for both businesses and households.

She said: “As an international retailer, Next has a bird’s-eye view of how economies are holding up around the world, and the patterns are pointing to underlying weakness in the UK. That’s why boss Simon Wolfson is reigniting the debate on tax and spending, calling for the government to hold off from creating an even greater burden for businesses.

“On the face of it, Next’s results look rosy – it leaned on clever marketing and on-point ranges to rack up online sales during the summer heatwaves. But the UK high street performance was left lacking, while growth in other regions across the world, particularly the Middle East and Northern Europe, was much stronger. While first-half sales for the group exceeded expectations, Next has cut its second-half sales forecast from 2.8 per cent to two per cent, with pressure mounting on the retail sector.

“Chains are already grappling with the hefty increase in employer National Insurance and the rising National Living Wage, which have pushed up the cost of putting people on the payroll. That puts the squeeze on margins and can force businesses to look harder at hiring, hours and investment, and already the retail jobs market is showing signs of strain.

“There are concerns shoppers will also become more cautious as they look set to face higher bills and borrowing costs, leaving less left over for discretionary purchases. Consumer spending is a major engine of the UK economy, so if households pull back, retailers feel it first, but the weakness can spread much further.

“Further taxation would add to the strain for both businesses and potentially households, making it harder for the UK economy to pull out of stagnation. Simon Wolfson isn’t the first and will be far from the last business leader to call for a rethink on the government’s tax and spend approach, with lobbying set to intensify as we approach the Budget.”