Marks & Spencer has reported a better than expected jump in profits but warned that measures in last week’s budget could cost the company more than £60m next year.

The British retail chain’s pre-tax profits hit £408m for the six months to October, up 17% on the same period last year, bolstered by sales rising 8.1% for food and 4.7% for clothing and homeware.

However, the M&S chief executive, Stuart Machin, warned that the budget’s “long-term impact on the company’s customers and suppliers was uncertain”.

He predicted increases in employer national insurance contributions (NICs) announced by the chancellor, Rachel Reeves, last week would add £60m to costs.

Machin also expects payroll expenses to rise by £60m. He did not break down how much of this was attributable to the government’s 6.7% rise in the minimum wage, but stressed that M&S had planned for the increase and would try to absorb the extra costs by looking for savings elsewhere in the business rather than passing them on to consumers.

Reeves plans to increase employers’ NICs by 1.2% to 15% from April, while the minimum wage will rise by 6.7% to £12.21 an hour and 16% to £10 for workers aged 18-20.

Speaking to journalists on Wednesday, Machin, who took the helm in May 2022, called the wage increase “a good cost” and said he understood Reeves had difficult choices to make.

The company reported a 10% increase in labour inflation this year, which it said was partly offset by structural cost reductions but would require further investment in efficiencies and automation.

The bumper profits for M&S mark the latest stage in a remarkable turnaround for the business, which has 240 full-line stores and 325 food outlets, in recent years.

They come two years after the company suffered a 24% fall in half-year profits as the cost of living crisis hit sales, while the business warned of a “gathering storm” as rising wages, energy, packaging and transport costs threatened its earnings.

However, under Machin the group has opened larger stores, cut prices on household basics and offered bigger packs, which have all contributed to better sales.

In May it reported that its full-year profits for 2023-24 had increased by 41%, with sales up across the business by more than 9%, and bosses describing M&S as being in “the best financial health it’s been in decades”.

Commenting on Wednesday’s results, Machin said: “Executing our strategy to ‘reshape M&S for growth’ has again delivered an increase in customers, sales value and volume, market share, profit and returns. Both food and clothing have now delivered market share growth for four consecutive years.”

The bumper half-year figures lifted the share price by almost 8% in early trading on Wednesday, although it later eased back to a 3% rise.