Greggs shares heat up 6% after 'pasty- tax' U-turn
Greggs, the UK's largest bakery chain, enjoyed a 6% share price boost on Tuesday after the government revised its "pasty tax" proposal.
The government had intended to levy 20% VAT on hot, freshly-baked takeaway foods to the consternation of bakers and food outlets across the UK.
Greggs, known for its pasties and sausage-rolls, had warned that the tax rise would "materially affect" its sales and profits.
It had lobbied against the move.
Greggs chief executive Ken McMeikan had met David Gauke, Exchequer Secretary to the Treasury, earlier in May to present an alternative proposal that was "simpler and more workable".
"David Gauke listened to our views," Mr McMeikan told the BBC.
"If we don't cook to order, our freshly-baked savouries will not attract VAT. It's much clearer for everyone in the industry... and a very sensible way forward for the government."
Under the new tax proposal food that is cooked on-site and then left to cool will not attract VAT. But food that is kept hot or re-heated, will.
The move will cost the Treasury £40m.
The British Retail Consortium gave a luke-warm response to the revised proposals.
"This is good as far it goes," said Stephen Robertson, BRC director general.
"It will spare hard-pressed customers price rises on some products but the government is still planning to add 20% to the price of things like rotisserie chickens which have previously been exempt.
"It should not be extending the scope of VAT at all."
A Greggs-backed petition against the VAT change had attracted 300,000 signatures, and its campaign received the backing of the National Association of Master Bakers and the Cornish Pasty Association.