Next Sets International Price Increases to Offset Rising Expenses
Next is implementing moderate price increases this month as businesses confront the fastest surge in cost pressures in over three years. The retailer revealed in a trading update that prices outside Europe will rise approximately 8% to counter an anticipated £47 million annual impact from escalating transport and air freight expenses tied to the ongoing US-Iran conflict.
Earlier this year in March, Next had projected an additional £15 million in costs, highlighting the sharp escalation in operating expenses.
UK Price Rise Remains Minimal Despite Global Cost Shocks
The company confirmed that UK shoppers will experience a modest average price increase of just 0.6%, reflecting Next’s revised cost forecasts. This restrained domestic adjustment aligns with broader retail sector warnings—particularly from food retailers—that widespread price hikes are unavoidable without government intervention to reduce soaring energy costs and tax burdens.
Rising Costs Pressure Businesses Beyond Retail
The intense cost pressures facing UK businesses are not captured in the latest S&P Global Purchasing Managers’ Index (PMI) for the service sector, which excludes retail. However, the PMI’s input cost inflation index surged to its highest level since November 2022, shortly after Russia’s invasion of Ukraine.
Purchasing managers reported that rising transportation expenses and salary increases drove this inflation spike. Correspondingly, the prices businesses charged customers rose at the fastest pace in over three years, reflecting the transfer of higher fuel costs to consumers.
Economic Experts Highlight Impact of Global Conflicts and Supply Chain Disruptions
Tim Moore, Economics Director at S&P Global Market Intelligence, commented on the survey: “April data showed a tentative rebound in UK service sector output growth following a sharp slowdown in March. Yet this recovery remains fragile as new business orders stayed low compared to early 2026.”
Moore emphasized that the Middle East conflict and subsequent global supply chain disruptions have severely dented both business and consumer confidence, keeping business activity expectations near nine-month lows.
Bank of England Monitors Inflation and Output for Interest Rate Decisions
The PMI figures contribute to the Bank of England’s policy considerations on interest rates. Governor Andrew Bailey recently indicated that the Monetary Policy Committee will scrutinize signs of secondary inflationary effects, such as larger wage hikes, which could justify increasing the current Bank Rate of 3.75%.
Analyst Warns of Potential Economic Slowdown After Initial Surge
Thomas Pugh, Chief Economist at RSM UK, noted that the PMI data suggests the UK economy may be more resilient to the energy crisis than expected. However, he cautioned this rebound partly stems from businesses accelerating activity ahead of imminent price rises and supply shortages.
Pugh explained, “The decline in the backlog of work index implies firms are bringing orders forward. This raises the risk of a sharp output drop in May, although steady future output expectations offer some optimism that any decline will be moderate.”
Looking ahead, Pugh warned that persistent inflation and robust output levels could prompt the Bank of England to pursue further rate hikes. Yet, he stressed that future monetary tightening depends heavily on energy price movements, forecasting that the crisis will ultimately lead to rising unemployment and slower economic growth. This outcome suggests any interest rate increases will be limited and short-lived.
