Fashion giant Next has warned that the UK economy is facing a prolonged period of “anaemic” growth, with job opportunities set to decline under the weight of high taxes, rising regulation, and unsustainable levels of government spending. The sobering assessment came as the retailer, led by chief executive Lord Wolfson, announced a 13.8% rise in pre-tax profits to £515 million for the six months to the end of July.

Despite the upbeat financial results, shares in the FTSE 100 company fell by 6% in early Thursday trading as investors reacted to the retailer’s cautious outlook. Next, which operates more than 500 stores across the UK and Ireland, said it did not believe the economy was heading toward a “cliff edge” but warned the longer-term picture was bleak.

“The medium to long-term outlook for the UK economy does not look favourable,” the company said in its half-year report. “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.”

Next said that while profits had been boosted by strong summer weather and disruption at rival Marks & Spencer following a major cyberattack, the underlying economic pressures would likely dampen sales growth in the coming months.

The company first raised concerns about weakening UK employment two years ago and noted that the trend has since worsened. Vacancies have continued to fall while PAYE payroll numbers are now “moving backwards.” Entry-level employment, the report warned, is being squeezed by rising business costs, stricter regulation, and the advance of mechanisation and artificial intelligence.

Ahead of the government’s upcoming Budget in November, Next’s warning adds to growing pressure on policymakers to address sluggish economic performance. Lord Wolfson, a Conservative peer, has long been vocal about the risks of high taxation and regulation to business competitiveness and productivity.

Within its own operations, Next said job vacancies had fallen 35%, with sharper declines in its stores. Nevertheless, the retailer insisted it remained “in a good place, with multiple opportunities for growth both in the UK and overseas.”

Analysts say Next’s caution reflects broader concerns across the retail sector, where cost pressures and falling consumer confidence are combining to create uncertainty ahead of the crucial Christmas trading period.