Greggs slams government over warm food tax

Greggs confirmed it will vehemently impose the proposed legislation and accused the government of directly taxing its customers.

The accusation comes after Osborne revealed his plans to introduce the tax within six months, which could lead to cost increases of 20% for the firm.

Freshly baked​

But Greggs argued that, although some of its products can sometimes be warm after being freshly baked, they are not served as warm food once they become available to the customer.

Ken McMeikan, chief executive of Greggs, said: “There’s a scenario where someone at the front of the queue is subject to VAT and the person at the back ​[buying a product that has cooled down] isn’t.”​

“Consumers need help in making their money go as far as possible, not to see an increased tax on something they didn’t have to pay tax on previously. This is a straight tax on our customers at a time when their budgets are already hard-pressed.”​

McMeikan said Greggs was now preparing its case to fight the plans, which it feels should not apply to freshly baked savouries in the pastry industry.

But the Treasury dismissed the accusations and claimed that firms such as Greggs had been benefitting from a loophole within previous legislation.

A spokesman said: “Hot takeaway food has been liable for VAT for more than 30 years. These changes will close loopholes, which has meant that some hot food hasn’t been​.”

Following Osborne’s budget speech last week, Greggs’ share price fell by 29.5p to £5.20p, a decline of 5%.

But Julian Wild, food group director at law firm Rollits, believed the firm would be able to recover from the drop, despite highlighting the significance of the proposed ‘pasty tax’.

Very significant​

He told FoodManufacture.co.uk: “Clearly savouries are very important to Greggs and if they were suddenly taxed then it would be very significant for them. I think they will fight hard to resist it but clearly it will have an impact on cost.”​

Wild was also quick to point out that the plummeting share price could also have been a knee-jerk reaction to the announcement, something that often occurs after a budget.

“It is important to point out that, often, these types of things tend to be an immediate reaction to changes in the budget. It could have just been an overreaction on the share price​,” he said.

“But I fully expect Greggs to come back from this. It has a very strong business, a big range of products and I’d be very surprised if this had a serious long-term effect on the business​.”