Next warned that clothing prices could rise 8 per cent or more next year after it was exposed to a further jump in the cost of cotton.

The high street fashion retailer previously said it expected cotton prices – which reached a record of $1.392 a pound on Wednesday – to push up the cost of clothing by between 5 per cent and 8 per cent.

Lord Wolfson, chief executive, said he now expected the escalation, from early next year, to be “nearer 8 per cent rather than 5 per cent, and it could go higher”.

“There is a little bit of a speculative bubble and also, when people say there is going to be a fuel shortage, everyone fills up their tanks and it almost becomes a self-fulfilling prophecy,” he said.

“Manufacturers are buying cotton to protect themselves against future price rises and that is pushing the [price] up.”

He acknowledged that Next had not hedged against increases in the cotton price, as the raw commodity represented just 8 per cent of the price of a garment, and hedging instruments were expensive.

Lord Wolfson said the impact of the rise in clothing prices was the “big uncertainty about next year”.

The 8 per cent increase also includes about 2 percentage points from the rise in the VAT rate from 17.5 per cent to 20 per cent on January 4.

Next also warned that it might not maintain its current position at the upper end of its sales growth forecasts in the fourth quarter of this year as it would be up against tougher comparatives from last year.

Total sales for the three months to October 30 – comprising both Next Directory and store sales – rose 2.2 per cent compared with the same period last year. This puts Next on track to meet its guidance for sales growth of between zero and 3 per cent for the entire second half.

Across the store estate, sales fell 0.3 per cent, although sales from stores open at least a year were down 3.3 per cent. Next maintained its forecast of a fall in like-for-like sales of between 1.5 per cent and 4.5 per cent in the second half.

Sales at Next Directory, the online division, jumped 7.9 per cent in the third quarter, putting the division in line to meet group forecasts of between 4 and 8 per cent sales growth for the second half.

Lord Wolfson, who was named a Conservative working peer in May, said he saw no sign of consumers reining in their spending, in spite of the austerity measures set out by the government last month.

“I don’t think we are going to see a collapse in spending,” he said. “We are going to see more of the same, [a] very sluggish, low to no growth consumer environment for some time to come.”

Shares in Next fell 49p to £21.80.

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