Next share price slumps on gloomy prediction for UK economy
Next shares sunk on Thursday morning after the retailer issued a stark warning that the UK faces ‘anaemic’ growth due to a combination of technological and regulatory changes.
Despite reporting a 10 per cent rise in half-year sales, the FTSE100 company flagged “strong evidence” of a material squeeze on wider UK employment levels due to rising costs, mechanisation, AI and new legislation.
It said job vacancies at Next have fallen by a third in the last two years, while applications have risen by 76 per cent.
Next cited higher employment costs due to recent Employers’ National Insurance increases and long-term increases in the national wage, as well as mechanisation – something encouraged by high employment costs – and unintended consequences from well-intentioned reforms in the Employment Rights Bill.
The company said the pressure on employment is likely to create more gradual job losses than in past recessions, with companies responding by not filling vacancies, rather than large-scale redundancies.
“The problem is likely to be felt by those looking to enter the workforce or move jobs – the challenge will be finding suitable vacancies.
“That certainly resonates with the stories we hear about the difficulties young people are experiencing when trying to find work,” Next said.
However, it added it does “not believe the UK economy is approaching a cliff edge… At best we expect anaemic growth.”
Next and its chair, Lord Woflson, have been vocally against changes to employment rights and national insurance contributions (NICs).
Earlier this year, Wolfson backed an amendment to NICs in the House of Lords, calling a phased introduction to the tax.
He has also described the employment rights bill as a “wrecking ball” for part-time work.
Chris Beauchamp, chief market analyst at IG, said that Wednesday’s warning had “more weight” than the usual Next tradition of downplaying its results.
“[It points] towards low growth and tough times ahead… though if any company can weather the storm, it is likely to be this retail success story.”