What Truss and Kwarteng could learn from Next CEO and Tory peer Simon Wolfson

Next CEO Simon Wolfson is not a natural critic of the government. He sits in the House of Lords as a Tory peer. He is the scion of a famous Tory family. He is a sometime party donor and a prominent Brexiteer, who was once featured in a Daily Telegraph rundown of “the right’s 100 most influential”.

His statements contained in the retailer’s half-year results are therefore worthy of scrutiny.

Here’s what he had to say about the current imbroglio: “The devaluation of the pound looks set to prolong inflation, even once factory gate prices ease. It looks like we may be set to have two cost of living crises: this year, a supply-side-led squeeze, next year a currency-led price hike as devaluation takes effect.”

He allowed that the government could, and probably should, “ease the UK’s journey through this cost of living crisis” by smoothing the “economic shock of sky-high energy prices”.

Which, of course, it has done.

But then there was this: “Borrow and spend remedies can ultimately only treat the symptoms of inflation; they are not the cure. And there is a balance here, as we are already seeing, when a government borrows too much their currency will devalue, and stoke inflation next year.”

Now, Wolfson had some ideas about how the government can find some savings (it’s going to need a lot of them). He cited scrapping HS2 as one example.

There was also some snark for the media the prime minister might have well enjoyed, especially after she was shredded by a succession of local radio presenters: “Before this document sinks to levels of depression only usually seen in newspapers, it is worth pointing out that there are some features of our economy, such as employment opportunities and accumulated savings, that bring some comfort.”

That’s told us! This might also have warmed the cockles in a chilly Downing Street: ”It is many years since we have seen a government as ambitious and willing to tackle supply-side reforms.” Go Liz!

The Next boss is, then, clearly still a member of the faithful. But he appeared to be at least partly pinning the blame on the government for the inflation that is causing so many problems. He seems queasy and well he might be, given the impact the current crisis is having on his business.

Wolfson said he wasn’t much of a fan of forecasting, clearly hoping the markets would give him some leeway. He went so far as to call on a famous quote from the economist John Kenneth Galbraith: “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.”

But investors saw the way he cut Next’s sales and profits forecasts and decided it was time to dump the shares. True, shares were being sold across the board (partly in reaction to the prime minister’s car crash interviews). But Next markedly underperformed the market.

Small wonder. This is a retailer that does well with everyday staples. But you can find them cheaper. Cutting back on new clobber is also one of the easier savings to make for people who are feeling the pinch. And who isn’t?

If Wolfson had really wanted to send a message to the Truss/Kwarteng wrecking ball which has smashed into the UK economy, he might have pointed out that a couple of years ago Next decided to experiment with higher fashion.

This was understandable enough: the margins are spicy. But the retailer’s shoppers didn’t bite. They go to Next for everyday gear. So the plan rather blew up in Wolfson’s face.

Instead of doggedly sticking with it, he realised it wasn’t working and he got Next back to doing what its success was built on. In other words, he performed an adroit U-turn because that’s what you do when you make a move that everyone can see isn’t working.