The next boss warns of a bleak winter for High St: fellow Tory Lord Wolfson says ‘the jury is out’ on whether Truss’s economic plan will work
Next’s boss said the jury was out on the government’s economic plans as the retailer warned of the impact of cost-of-living pressures to come.
Lord Wolfson, a Tory peer, said ministers were “making all the right noise” on the supply-side reforms needed to boost the British economy.
But he warned that “the jury is out” on whether Liz Truss and Kwasi Kwarteng’s strategy would work. Next’s chief executive made the remarks as he cut his full-year earnings outlook, with sales expected to fall in coming months.
Positive signs: Lord Wolfson, a Tory peer, said ministers were “making all the right noise” on the supply-side reforms needed to boost the British economy.
The share price fell 12.2 percent, or 650 pence, to 4,674 pence as it reported a 16 percent rise in pre-tax profit to £401 million for the six months to July.
But the chain, which sells in about 500 stores and online, expects sales in the second half to fall 1.5 percent.
He said August trading was worse than expected and September could be boosted by government help on the energy bill, but “cost of living pressures will pick up in the coming months.”
Wolfson predicted that the pain caused by rising energy prices would be followed by the impact of the pound falling against the dollar, making imports more expensive, although it has recovered from record lows in recent days.
“It looks like we may be ready to have two cost-of-living crises: this year a supply-side-driven contraction, next year a currency-driven price increase as devaluation kicks in,” he said. .
Wolfson said it was clear that the loans needed to finance Chancellor Kwarteng’s £45bn tax cuts and a power bill freeze that experts say could cost £100bn, would put downward pressure on The pound.
“However, whether or not they have overspent will depend on the ambition and depth of their supply-side reforms,” he added, saying he wanted changes to rules on planning, tariffs, economic migration and energy markets to accelerate the increase.
‘If the government is so aggressive in tackling supply-side problems, there is a chance that growth will pay for the stimulus.
“If those measures are not enough or come too late, it will be hard to justify the cost.” Next said its costs are up 8 percent for the spring and summer of next year.
But Wolfson told the Daily Mail: “What we’re really worried about is next fall and winter because we haven’t bought all our money for that season yet.” If the currency remains where it is, then the inflation in the cost price of our goods will be more acute”.
Wolfson stressed, however, that cost price increases will not fully translate into store prices.
He said Next would not stop investing in technology and products, even though he sees the impact of supply shortages and currency weakness well into 2024.
He said: ‘We are not going to take our foot off the gas, no matter how long this crisis lasts, and it will probably be six to 18 months, at some point it will end and what will matter then is what shape the business is in.
‘If we stop investing and reduce investment in things that we think are good investments, it will be a big mistake. Whenever you are in the middle of a crisis, it seems like it will never end.
They always end.
Wolfson said UK consumers had built up savings in recent years and the coming recession would be different from the 1980s or 1990s, where a huge number of jobs were lost.
With vacancies still high, he said, “It looks like we’re going to have a full-employment recession.”
