If Next plc is anything to go by, the cost increases it faces in the coming financial year are not as out of the ordinary as many make out

UK businesses continue to bemoan their lot when it comes to the negative impact of the government’s 2024/2025 Budget, announced last November. Just the other day, we noticed a story that Next plc CEO Lord (Simon) Wolfson had – by virtue of his being a member of the House of Lords – tabled an amendment to the Budget aimed at softening its impact on companies in terms of the increased National Insurance bills they will otherwise be paying in the year ahead.

Wouldn’t you know it, but it turns out that Next plc publishes information on its internal cost projections every year as part of the process of setting out its earnings guidance, if you know where to look. We extracted this data for the Company’s last ten fiscal years, and we present it below.

For Next’s forthcoming Financial Year 2025/2026 (which starts on 22nd March), the company is projecting known increases to its cost base of ￡81m, including the impact of the Government’s Budget (the requisite table in the company’s 7th January Trading Statement appears as Figure 1 below). This includes what the company says is a ￡67m hit to its costs arising from the changes in Employer National Insurance AND the wage increases it is paying (some of the latter being linked to changes in the Living Wage).

Figure 1

Figure 2 below sets out equivalent data on projected cost increases at Next plc for the last nine financial years (data for 2020/21 was not published due to Covid uncertainty).

Figure 2

I don’t know about you, but this ￡81m of known cost increases doesn’t exactly leap off the page as being a significant anomaly in historic terms: for one thing, it’s the lowest degree of known cost inflation that the company has projected in the past four financial years. And it the burden is lower still when one expresses the cost increase data in terms of the company’s (rising) revenue (see Figure 3).

Figure 3

Next is just one company, of course. We might repeat the analysis for a few more big retailers in the next couple of days (or late nights, more likely) to see if it is a particular outlier or not. But if Next is anything to go by, the cost increases it faces this coming year don’t seem to be anything like as out of the (recent) ordinary than is continuing to be made out.