Pasty Tax Warning As Greggs Sales Fall

Greggs the bakery has blamed a recent fall in sales on Britain's wet weather while warning that the Government's 'pasty tax' could cause store closures and job losses.

Greggs, which sells sandwiches, savouries, bread, cakes and pastries, said that like-for-like sales at stores open over a year fell by 1.8% in the 19 weeks to May 12.

The bakery chain, which has 1,600 shops in the UK, said trading had been "disappointing" as a result of the miserable weather, which has continued into May after the country's wettest April since records began.

Total sales rose by 4.3% over the period, but only because of new store openings.

With consumers' disposable incomes under pressure from high fuel, energy and food costs, Greggs chairman Derek Netherton said: "The trading environment for all retailers has remained extremely challenging, and high street footfall has remained relatively weak."

In its trading update, the retailer also stepped up its argument against the government's proposals to extend VAT to hot takeaway food - including pasties and sausage rolls, cautioning it would have a material impact on sales and profit.

Greggs warned that the so-called pasty tax "will have a disproportionate impact on the specialist bakery sector, resulting in further unemployment, high street closures and reduced investment".

The firm's chief executive Ken McMeikan said customers have given "universal support" to the group's campaign against the plans, outlined in the Chancellor's March Budget, to extend the 20% tax to freshly baked savouries that are sold warm.

He added: "Our customers think that this is the wrong tax.

"They're completely confused by it. At a time when the consumer is under enormous pressure, our customers remain clear - this is something they do not want."

Mr McMeikan is due to present an alternative proposal, which he claims is "simpler and more workable", to the Treasury later in the week.

Shares in the firm have been under pressure ever since the Government announced the tax change, which is due to come into force in October.

A row erupted as soon as the proposals were announced, with politicians including Prime Minister David Cameron and Labour leader Ed Miliband going to great lengths to show they enjoyed eating pasties and hot sausage rolls.

Greggs added that it expected consumer spending to pick up over the summer thanks to the celebrations marking Queen Elizabeth II's Diamond Jubilee, the London Olympics and the Euro 2012 football championships.