Next plans 'moderate' price hikes as rising costs hit businesses

Next is planning "moderate" price increases this month as a closely watched survey of companies reports the fastest rise in cost pressures for three-and-a-half years.

The retailer used a trading update to guide that international prices outside Europe would go up by around 8% this month as it grappled an expected £47m annual hit from things like extra transport and air freight costs linked to the effects of the US-Iran war.

It had forecast £15m of extra costs back in March.

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The company maintained its view that UK shoppers would only see a 0.6% average hike to prices ahead, under its new cost assumptions.

Its actions chime with warnings from the wider retail sector, especially food, that widespread price rises are inevitable without government action to help bring down their energy-related costs and tax bills.

The pressures facing the industry are not included in the monthly S&P Global Purchasing Managers' Index (PMI) for the services sector as it does not cover retail.

But its measure of input cost inflation hit its highest since November 2022 - the aftermath of Russia's invasion of Ukraine.

Purchasing managers reported that higher transport costs and salaries contributed to the surge.

Prices charged by businesses also rose at the fastest pace in more than three years as they passed on higher fuel costs to customers.

Tim Moore, economics director at S&P Global Market Intelligence, said of the survey's findings: "April data signalled a modest recovery in UK service sector output growth after the considerable loss of momentum seen in March. However, this improvement could easily prove short-lived as new business intakes remained subdued in comparison to the start of 2026.

"Survey respondents widely noted that the Middle East conflict and subsequent global supply chain disruptions
had weighed heavily on business and consumer confidence.

"Business activity expectations for the year ahead edged up only slightly from March's nine-month low."

The PMI data forms part of the Bank of England's thinking when it comes to the setting of interest rates.

Governor Andrew Bailey signalled last week that the rate-setting committee would be looking closely for signs of so-called secondary effects such as bigger pay rises - which, if realised, would bolster the case for Bank rate to go up from its current 3.75%.

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Thomas Pugh, chief economist at consulting firm RSM UK, said the PMI data could suggest the economy is proving more resilient to the energy shock than had been feared.

"However, the rebound is partly fuelled by a rush of activity before price rises and supply shortages start to bite," he wrote.

"Indeed, the backlog of work index dropped back, indicating that firms are bringing orders forward. That means there is a significant risk of a sharp drop in those output indicators in May, although the stability in the future output index gives us some hope that any decline will be modest.

"For the Bank of England, rising inflation indicators along with resilient output balances, if they are maintained over the next few months, makes future rate hikes more likely.

"Obviously, everything depends on how energy prices move going forward, but we still think the ultimate impact of the crisis will be a rising unemployment rate and weaker economic growth, which means any tightening cycle will be short and shallow."

(c) Sky News 2026: Next plans 'moderate' price hikes as rising costs hit businesses