
Welcome to our round up of the latest business news for our clients. Please contact us if you want to talk about how these updates affect your business. We are here to support you. www.shaikhandcoaccountants.com, 01732 247550.
Navigating pricing strategies amid rising wage costs: Insights from Next
Tax measures taking effect in April mean that businesses are facing rising wage costs in 2025. As a result, many businesses are looking at whether price increases could help them manage the financial impact without losing customers.
High Street retailer Next recently announced a price increase of 1% on some clothing items to help offset an anticipated £73 million rise in staff wages and taxes. Their strategy and decisions provide some useful lessons.
Why wages costs will increase
Wages are increasing due to changes announced in the 2024 Autumn Budget, that start in April 2025, including:
- An increase in employers’ National Insurance contributions from 13.8% to 15%.
- A rise in the National Living Wage from £11.44 to £12.21 per hour.
Next’s 1% price increase, despite being below the rate of inflation, reflects a broader trend among businesses. The British Chambers of Commerce business group recently said that over half of companies plan to raise prices in the coming months to cope with higher costs.
A pricing strategy based on a shift in behaviour
For businesses like Next, keeping the price increase modest allows them to avoid alienating their price-sensitive customers. Their decision to target specific product lines – rather than implementing a blanket rise – may help to retain customer loyalty while addressing the immediate financial strain.
Next acknowledged that the price increase is “unwelcome”, however they feel their analysis supports their strategy. They have observed a trend in shoppers choosing mid to higher priced items instead of buying cheaper items. They are not necessarily spending more overall but are buying fewer, slightly more expensive items. This is a trend Next expects to continue in the short term.
This shift in behaviour has influenced Next’s decision on pricing strategy. By targeting price increases on product lines where customers may be less sensitive to paying more, they can maintain value for their customers while managing their margins.
Lessons for businesses
Next’s approach offers valuable lessons for businesses developing pricing strategies in response to rising wage costs.
- Incremental adjustments: Small, targeted price increases can help mitigate your cost pressures without overwhelming customers.
- Focus on value perception: Shopper trends suggest that emphasising mid-to-higher priced items could help maintain your profitability.
- Monitor your customer’s behaviour: Next have undertaken a strategy based on what they’ve observed in their customer’s behaviour. Likewise, if you can understand any shifts in the spending patterns of your customers, this may help you to see where price increases are less likely to alienate them.
There is no doubt that rising wages costs will present challenges to businesses over the coming months. However, if Next have got their sums right, they are expecting to be able to increase their profits by 3.6%. This demonstrates that a carefully planned pricing strategy may also help you to adapt to the rising costs while maintaining competitiveness in these challenging times.
If you need help with an analysis of how changing your pricing strategy could help your business, why not give us a call? We would be happy to help you!, we have special expertise in helping clients in this area.
Tax return filing deadline looms
With the 31 January Self-Assessment tax return filing deadline fast approaching, HM Revenue and Customs issued a press release last week noting that 5.4 million taxpayers are yet to complete their return.
Apparently more than 24,800 people filed their return on New Year’s Day, while a further 38,000 had filed theirs on 31 December. 310 filed their returns between 11pm and midnight.
Missing the 31 January deadline can lead to an initial late filing penalty of £100.
If you need help with your tax return or are not sure whether you need to complete one, please give us a call and we will be happy to help you.
New digital markets competition regime now in force
Last week, the Competition and Markets Authority (CMA) set out its initial plans for the new digital markets competition regime. The regime is designed to support the UK’s tech sector and has its legal footing in the Digital Markets, Competition and Consumers Act. The Act received royal assent in May 2024 but came into force on 1 January 2025.
The regime is intended to prevent very large, generally global, tech firms using unfair advantages to shut out smaller businesses. Following an investigation, which can take up to a maximum 9 months, the CMA has the power to designate a business as having “Strategic Market Status” (SMS) in relation to a particular digital activity.
Once a business has been designated in this way, the CMA can impose certain conduct requirements on the business, or it can introduce pro-competition interventions for the benefit of UK consumers and businesses.
The CMA have said that they expect to launch investigations in relation to 2 areas of digital activity in January. The next investigation into a third area is likely to begin towards the end of June.
It has not yet been revealed which areas of digital activity are going to be investigated. The CMA have said more detailed announcements on this will be released later in January.
As it launches its investigations, the CMA also plan to provide more detail on how a particular designation is likely to help affected businesses and consumers.
It’s early days for seeing what practical benefits the regime will bring, however it could provide UK tech businesses with opportunities to innovate and grow in a fairer business environment.
To review the CMA’s guide on how the UK’s digital markets competition regime works, see: https://www.gov.uk/guidance/how-the-uks-digital-markets-competition-regime-works
Balancing AI’s promise and pitfalls
Artificial intelligence (AI) continues to bring benefits across many industries, including healthcare diagnostics and consumer technology. However, as its applications expand, so do concerns about its accuracy and potential for misuse. Two recent examples—the use of AI in detecting ovarian cancer and its controversial implementation in summarising news—illustrate both the transformative potential and the risks of AI.
Two business rates agents suspended by VOA
The Valuation Office Agency (VOA) have announced the suspension of two business rates agents. These are Rateable Value Experts and Re-Rates UK. The VOA have not specified the exact reasons for the suspension and have simply said that they are investigating a potentially serious breach of their agent standards.
While the suspension is in force, the VOA won’t work with or accept any information from the two agents. This is likely to cause difficulties for any customers that they are representing, and so the VOA have written to customers that are affected.
As part of the announcement, the VOA have reminded businesses of the need to be cautious of agents who:
- try to pressure you to make a decision or sign a contract.
- say they are acting on behalf of the VOA or forward emails to you that they claim are from the VOA.
- demand large sums of money up front.
- make claims about ‘unclaimed credits’ or similar.
It is worth noting that there is no need to use an agent to handle your business rates related matters. The VOA provides a free online service where you can challenge your rateable value for yourself.
The VOA also provides a checklist of agents that you can use to select an agent. They point out that using this is safer than allowing an agent to select you.
See: https://www.gov.uk/government/news/temporary-suspension-of-business-rates-agents
Government announces £289 million investment to deliver faster broadband to remote areas
The UK government has announced contracts worth over £289 million to provide gigabit-capable broadband to 131,000 homes and businesses in some of the country’s most remote locations. The initiative is part of the government’s Project Gigabit program, which aims to modernise broadband infrastructure across the country.
The contracts will focus on regions such as the Dee Valley, Isle of Anglesey, and Shropshire Hills, as well as parts of North and Southwest Wales, Herefordshire, Devon, Somerset, Essex, North East England, and Worcestershire.
Project Gigabit: An overview
Project Gigabit seeks to bring high-speed internet to hard-to-reach areas, where commercial providers have traditionally found it challenging to operate.
As of now, over 85% of the UK can access gigabit-capable connections, and more than 1 million premises in rural and remote areas already have access to upgrades. The ultimate goal is full gigabit coverage across the UK by 2030.
Benefits for rural areas
There are many advantages to faster broadband, including improved access to remote healthcare services, online education, and remote working opportunities. High-speed connections can also benefit businesses by enhancing their ability to operate and serve customers online.
Openreach CEO Clive Selley noted that the expansion of full-fibre broadband could boost UK productivity by £73 billion and bring significant social benefits.
Disclaimer Notice
The information contained in this article is for general information purposes only and does not constitute advice, Whilst we endeavour to keep the information up-to-date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability for a particular purpose. We recommend that professional advise should be taken from a suitably qualified expert before undertaking any action