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UK fashion chain Next has warned that the UK economy faces years of “anaemic” growth, held back by fewer jobs, stifling regulation, unsustainable government spending and higher taxes.

The stark assessment from the FTSE 100 company came as the retailer maintained its full-year profit outlook of just over £1bn on Thursday but said it remained cautious about the second half of the year as sales slowed.

The group, which has 457 stores and makes most of its sales in the UK, is widely seen as a bellwether for the financial health of Britons.

It said that while it was “in a good place, with multiple opportunities for growth . . . our enthusiasm is tempered by . . . the belief that the UK economy is likely to weaken going forward”.

Next shares fell 6 per cent in morning trading in London before recovering some losses.

The company said entry-level jobs appeared to be under particular pressure because of higher costs, red tape and the impact of “mechanisation and AI”.

Lord Simon Wolfson, a Conservative peer who has been chief executive of Next for more than two decades, told reporters that the company “is taking on fewer people at entry level — not because we’re cutting back, but because we’re getting lower churn mainly, but also where we are getting the most benefit from AI tends to be an entry-level job”.

“Automation tends to be helping people to do their jobs more efficiently, rather than replacing the job altogether,” he added, saying “you won’t see a large number of people losing their jobs”.

He insisted Next was “never party political” and that “I don’t think we’re saying anything that other people aren’t saying elsewhere”.

“The medium to long-term outlook for the UK economy does not look favourable,” Next said in its statement.

“At best, we expect anaemic growth, with progress constrained by four factors: declining job opportunities, new regulation that erodes competitiveness, government spending commitments that are beyond its means, and a rising tax burden that undermines national productivity.”

But the company also stressed that “we do not believe the UK economy is approaching a cliff edge”.

Nick Bubb, an independent retail analyst, said Wolfson “has a reputation for being too cautious, but sometimes he is right to be so”.

Full-price sales at Next rose 10.9 per cent in the six months to the end of July, driving a 13.8 per cent increase in group pre-tax profit to £515mn.

Next forecast sales growth of 4.5 per cent for the second half of the year, down from the 10.5 per cent achieved in the second quarter, when it benefited from a cyber attack at rival Marks and Spencer. 

Separately on Thursday, another UK retailer, Pets at Home, cut its guidance off the back of subdued demand and announced that chief executive Lyssa McGowan had left the business with immediate effect.

The FTSE 250 company lowered its forecast for annual pre-tax profit to between £90mn and £100mn, down from a range of £110mn to £120mn, citing a 5 per cent decline in its store sales in the second quarter. Its shares were down 16 per cent in morning trading.