Next delivers price hike warning over living wage

High street bellwether Next saw its profits rise 7.1 per cent in the first half of the year, but warned it might have to hike prices to pay its staff the living wage.

By SCOTT REID

Published 11th Sep 2015, 01:00 BST

Next reckons the new Living Wage will eat into profits and could result in prices rising. Picture: Contributed

Pre-tax profits hit £347.1 million for the half year to July, up from £324.2m a year earlier. The group, which trades from more than 500 shops in the UK and Ireland, some 200 mainly franchised stores overseas and its Directory catalogue and online business, also reiterated its full-year outlook.

It said the impact of the living wage would be “manageable”, but warned of possible price hikes as it faces soaring wage costs.

The living wage requires that all staff over 25 be paid a minimum of £7.20 an hour from next April, rising to at least £9 an hour by 2020.

The retailer estimated the cost of implementing the move to be £2m for next year, but said it could rise to £27m a year as the requirement grows.

Only £11m of that cost will go towards ensuring all staff are paid the minimum level, with £16m used to maintain pay differentials between members of staff. These additional costs could mean a 1 per cent price hike for consumers.

However, the company cautioned that overall wage rises would add a further £120m to annual costs. This could add a further 5 per cent to price rises, meaning an increase of 6 per cent by 2020 as a result of wages.