Retailers flag rising costs as supply chain pressures build
Clothing prices in the UK could rise sharply later this year if conflict in the Middle East persists, according to the chief executive of Next. The warning reflects growing concern across the retail sector that higher energy and manufacturing costs may begin to filter through to consumers already facing sustained cost-of-living pressures.
Fuel and factory costs threaten price stability
Simon Wolfson said prices for clothing and homeware could increase by between 4% and 10% if disruption continues into the autumn. The main driver, he noted, would be rising fuel costs affecting factories and logistics.
So far, the retailer has experienced minimal disruption. Shipping delays of up to two weeks have been reported, largely due to slower vessel speeds aimed at reducing fuel consumption. However, Next has avoided stock shortages by maintaining higher inventory levels.
If the disruption continues into early summer, Wolfson indicated that modest price increases of around 1% could begin to appear from June or July. A three-month period of elevated costs could add approximately £15 million to the company’s expenses.
Despite these pressures, he said the business is working to offset higher fuel and freight costs through savings elsewhere, and does not currently expect an impact on annual profits.
Wider retail concerns over consumer impact
Concerns are not limited to UK retailers. H&M has also warned of the potential impact on consumer spending.
Its chief executive, Daniel Ervér, said prolonged conflict combined with sustained high energy prices would increase inflationary pressures on households already under financial strain.
For UK consumers, this comes at a time when household budgets remain sensitive to rising bills, particularly energy and food costs. Retail analysts suggest discretionary spending on clothing could be among the first areas to be cut if prices climb further.
Strong sales help offset uncertainty
Despite geopolitical concerns, Next has upgraded its profit forecast for the year to January 2027. The company now expects profits of £1.2 billion, an increase of £8 million, following stronger-than-expected trading in January.
Sales in the Middle East account for around 6% of the group’s turnover and may be affected in the short term. However, overall performance has been supported by robust international growth, including partnerships with platforms such as Zalando, and the integration of newly acquired brands including Cath Kidston.
Domestically, both in-store and online sales in the UK have also shown steady growth, suggesting consumer demand has not yet weakened significantly.
Wolfson said there were no clear signs of declining consumer confidence at present, but warned that behaviour could shift once higher costs are reflected in retail prices.
Investment in technology and stock resilience
To mitigate supply chain risks, Next has increased its stock levels by 6%, partly supported by expanded warehouse capacity. The company is also investing in technology, including artificial intelligence, to improve operational efficiency.
AI is already being used to forecast demand, optimise pricing strategies and manage product sizing across stores and online platforms. According to the company, the technology is more likely to reshape roles than replace jobs entirely, particularly by reducing repetitive tasks.
However, Next acknowledged that routine processing roles are likely to be most affected, reflecting broader trends across the UK labour market.
Outlook depends on duration of conflict
In its latest trading update, Next emphasised the uncertainty surrounding the situation. The company said it remains difficult to predict the medium-term effects on supply chains, freight costs and consumer demand.
Much will depend on how long the conflict continues and whether it causes lasting disruption to global energy infrastructure—an issue that could have significant implications for UK inflation and retail pricing.
Conclusion
While UK retailers have so far weathered the immediate impact of Middle East tensions, prolonged disruption could translate into noticeable price increases for consumers later this year. With energy costs and supply chains closely linked, the outlook for clothing prices will largely depend on how the geopolitical situation evolves in the months ahead.
Thomas Hardy is a contributor to OE Mag, covering news, politics, business, technology, sport, entertainment, and lifestyle. He focuses on clear, accurate reporting and useful information that helps readers stay informed about current affairs and developments that matter to them. His work highlights relevant stories, emerging trends, and key issues, presenting them in a balanced, accessible, and reader-friendly way.