Greggs has seen a £20m drop in value as the government announced its plans to apply a standard rate tax of 20% to hot food products.
The high street retail bakery saw its share prices decline by 4% to 528p on Wednesday (21 March), after details of the new VAT rules were outlined in the Budget by George Osborne, Chancellor of the Exchequer.
A consultation document entitled ‘VAT: Addressing borderline anomalies’ described the move to tax hot products such as pies and pasties, which will take effect as of 1 October 2012.
Mike Holling, chairman of the National Association of Master Bakers (NAMB), has labelled the new VAT rules as confusing for UK retail bakery businesses. He said: “This could have quite an impact on the bakery industry. Confusion is going to linger over this new tax on hot foods, such as classifying what ambient temperatures are.
“There’s so many grey areas to this, for both companies and their customers, and in an already challenging time on the high street.”
Holling added that the move could be a hidden agenda of the government as a means of stopping customers from purchasing baked goods that could be deemed unhealthy. “The bakery industry is an easy target in this instance and if this is the case I would have to disagree. We have done a lot of hard work as an industry, and at the NAMB, with the Food Standards Agency when it comes to salt reduction.”
The Budget document read: “VAT will also apply, to the extent that it does not already do so, to the sale of hot food, cold food consumed on the supplier’s premises.”
Closing date for comments have been set for 4 May 2012.