Next unfazed by £27 million bill for living wage as profits impress

Next chief executive Lord Wolfson has shrugged off a looming, £27 million a year bill from the new national living wage, as the fashion giant’s interim profits once again impressed the Square Mile.

The boss of the chain that serves around five million customers a week said the company has already begun driving through productivity improvements before Chancellor George Osborne’s surprise Budget move to introduce a minimum, £7.20 an hour rate from April next year.

The cost of the move will be £2 million next year, but beyond 2016 Next believes that the policy would cost the company an extra £27 million a year by 2020 on top of anticipated wage inflation.

Next currently pays out £600 million — with a starter rate of £7.04 an hour. This is expected to rise to £747 million by 2020 as prices rise 6% in total over the next five years.

The Tory peer said the extra bill was “not a transformative amount” and added that the company had sharpened up productivity by employing fewer staff on longer contracts and allowing those who want to work longer to gain extra hours under an electronic “shift market place” system.

“Productivity is a focus not just for Next but for other retailers and the move to technology allows us to improve productivity in ways we couldn’t have been able to 10 years ago,” he said.

“Large number of people on small contracts in theory gives you flexibility, but if you do give them flexibility they are likely to take up other jobs. So you don’t necessarily have the flexibility you think you have.”

Next, which lifted its full-year guidance in July, posted pre-tax profits of £347.1 million for the six months to July, up 7% on last year and beating City hopes.

Shares lifted 2%, or 140p, to 7815p as a result.