Next has upgraded its annual profit forecast for the third time this year, suggesting British shoppers are continuing to spend despite the squeeze on household budgets. The retailer credited sunny weather and pent-up demand in the Middle East and northern Europe for a stronger-than-expected quarter, in contrast to rivals such as John Lewis, which has warned of "really tough" trading conditions and rising costs.

Full-price sales at the FTSE 100 firm rose 9% in the second quarter, more than double its original 4% forecast, over the 13 weeks to 1 August. It now expects annual pre-tax profit of £1.2bn, roughly £25m higher than previously guided and a possible 7.3% increase on last year, sending its shares up almost 7% to a record high. Chief executive Simon Wolfson's company, which owns UK rights to Gap and Victoria's Secret alongside stakes in Reiss and Joules, has a long track record of beating its own upgraded forecasts, a pattern analysts say has helped drive its share price up more than 20% over the past year.