UK high streets facing price surge – Britons fear empty pockets as cost of living bites

Spring Statement: Rigby says Autumn inflation rise is ‘startling’

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The firm cited rising energy prices and wage costs as key pressures – as the economy faces higher and more persistent inflation. Next expects selling prices to increase by eight percent in the second half of the year, up from a previous forecast of six percent. This is made up of a combination of a 13 percent rise in homeware and furniture – and a 6.5 percent rise on fashion. In its end of year results, the firm took aim at supply chain issues and labour shortages, which it said meant “there are simply not enough goods, energy and skilled workers to maintain living standards at the levels we have become used to”.

In particular, Next has called on the Government to reverse what it desribes as “self-defeating barriers” on overseas workers coming to the UK.

A warning over living standards was issued this week by the Office for Budget Responsibility which predicted the biggest fall in living standards since the 1950s as disposable income is squeezed by rising costs.

Next identifies inflation on both its own and competing goods as well as increases in tax and mortgage rates as potential negative influences on sales growth in the year ahead.

The company has also been challenged by the closure of its websites in Ukraine and Russia which has resulted in it lowering growth expectations for next year.

AJ Bell Investment Director Russ Mould said: “It seems inevitable the coming months may be more challenging given inflationary pressures are intensifying, and household bills are becoming much higher.

“Recent sales trends have seen consumers smarten up their appearance perhaps as more people are called back to work in the office.

“This dynamic could play out for a bit longer as this is arguably non-discretionary spend.

“But as we move towards summer, there is a high chance that consumers will be looking for ways to reduce their non-essential spending and so buying outfits for holidays and parties might become less frequent.”

Next’s share price has dipped over three percent following this morning’s results.

Despite the challenges ahead, Next has reported strong performance so far with record sales and a 10 percent increase in profits before tax.

Chief executive Simon Wolfson acknowledged the firm has been “fortunate”, praising the performance of its well established online business during the pandemic.

While admitting it is difficult to draw conclusions for this year, Next revealed sales so far are ahead of expectation following a sharp reversal of lockdown fashion trends – with a return to more formal clothing.

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Steve Clayton, select fund manager at Hargreaves Lansdown, said: “We hold NEXT plc in our UK funds because it is a superbly managed retailer, with the highest online exposure of any High Street operator in the UK and a cash generative business model.

“The business is performing strongly in unusual circumstances.

“Demand is holding up well, with the stores trading ahead of expectations, although some of this is a function of pulling business back from the website, post lockdowns.”

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