Next warns of possible price hike over Living Wage
By WGSN Insider

UK retailer Next has predicted it could be forced to raise its prices by 6% to the match the pay increases incurred by the …

Sep 11, 2015
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UK retailer Next has predicted it could be forced to raise its prices by 6% to the match the pay increases incurred by the government’s National Living Wage.

Under chancellor George Osborne’s plans, the minimum wage for over-25s will increase from £6.50 an hour to £7.20 in April next year, before growing to £9 by 2020. Next’s current hourly pay rate for adult staff is £7.04.

CEO Lord Wolfson said the introduction of the scheme next spring will cost the retailer £27m a year. This includes £11m to increase the wages of workers paid less than the national living wage at present, and £16m to increase the pay of the rest of the workforce to maintain wage differences, he said.

The 6% price increase would be a combination of 1% from the living wage itself and a 5% as a result of general wage inflation.

However, Wolfson played down the rises, calling the potential £27m additional cost “not immaterial but, in the context of Next’s wider cost base, not transformative”, adding that the 1% price increase over the course of four years is “unlikely to have a material effect on the trading performance of the business.”

“It should be noted that this is probably a pessimistic view of the required price rise, as we have assumed no improvements in productivity. In reality, we hope to be able to compensate for some wage inflation through increased productivity measures throughout the business,” Lord Wolfson said.

The prediction came as Next’s revealed half year results, in which pre-tax profits rose 7% to £347 million, while earnings rose 8%. Sales were also up 3.5% in the first six months of the year.


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