The gloom on the high street intensified still further yesterday when the chief executive of Next forecast that the slowdown could last for another 18 months.

Simon Wolfson said that there was no reason to expect any improvement in trading conditions, given the pressure on consumers from higher food bills and rising energy costs.

He added that cost-price inflation of up to 8 per cent could hit the clothing sector in spring next year, tightening the squeeze on margins.

“We are not budgeting for things to get worse, but we are not expecting them to get better, either,” Mr Wolfson said. “We are preparing the business not just for another six months of this, but another 18 months. We can see very little that will alleviate the financial pressure on our customers.”

Next reported a 12.4 per cent fall in pre-tax profits to £173.5 million over the six months to July. Like-for-like sales, which strip out new store space, dropped by 6per cent.

Mr Wolfson conceded that Next had endured a tough start to the year, but insisted that it was faring better than most of its rivals. He said that a large part of the slump in profits was down to the loss of two key contracts at Ventura, Next's third-party call-centre business.

He added that the decision last year to budget for the downturn meant that the amount of stock going into the summer sale had been cut back by 20 per cent. Gross margins in the retail business were up by 2.8 per cent as a result.

Mr Wolfson vowed to put “the magic” back into the Next brand by investing more in higher-quality clothing and increasing the number of new products. He said that this approach was beginning to pay off and that while like-for-like sales were down, average selling prices were up 5 per cent across the stores and Next Directory, the mail-order and internet business.

Shares in Next, up almost 30per cent since July, dropped 22p to £11.21.

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