Shares in Greggs rose in early trading after the government was forced to make a U-turn on ‘pasty tax’ last night.
The unpopular pasty tax, which would have raised the VAT on pasties from 0 per cent to 20 per cent, had contributed to a 15 per cent fall in Greggs’ share price since the Budget in mid-March.
In a trading update last month, the firm reported a 1.9 per cent decrease in like-for-like sales for the 19 weeks to 12 May 2012 and struck a cautious note due to the pressure on consumers’ disposable income.
Whereas most foods and drinks are exempt from VAT, it is levied on takeaway food that is sold hot and the original tax was designed to correct what Chancellor George Osborne termed an ‘anomaly’, by charging VAT on heated baked goods.
Greggs, and other bakery firms, had attacked the plans as unworkable and claimed they would lead to job losses and further store closures on the high street.
Osborne yesterday amended the proposed tax so that it excluded food that was ‘cooling down’ after having been taken out of the oven.
In response, Greggs’ stock is currently trading up 5.92 per cent at 494.2 per cent at 9.19am, still some way off the high of 558p before the pasty tax was proposed.