Greggs, the BB75 leading retail bakery chain, has this morning reiterated its opposition to the proposed 20% pasty tax, saying the move would cause “new anomalies” and “uncertainties”.

In an interim management statement ahead of its annual general meeting, which is held later today, it said total sales were up by 4.3% in the first 19 weeks of its new financial year. However, it also revealed its like-for-like sales (LFLs) had suffered – dipping by 1.8%.

However, it was the ongoing row on the pasty tax to which the company devoted most of its attention and Greggs warned that, with savouries accounting for more than a third of its sales, an outcome could have a “material impact on our sales and profits”.

In a statement, Derek Netherton, chairman, said: “We support the government’s aim of tax simplification, including clarification of the definition of ‘hot takeaway food’. Greggs has always charged VAT on products in this category, such as hot sandwiches, soup and hot drinks.  

“What we cannot support is the government’s current proposal to extend the standard rate of VAT to freshly baked food, where there is no attempt to keep it hot and which is not designed to be kept hot.”

And he warned: “The proposed changes are, in our opinion, unworkable and would give rise to many new anomalies and further uncertainties. In our submission we will also highlight our concern that the estimate of the extra VAT revenue generated makes insufficient allowance for the income tax, NI contributions and corporate tax that would be lost, as well as the cost of extra unemployment pay.”

On top of the tax row, Greggs also warned the consumer environment was still difficult and admitted its increase in sales had largely been driven by its expansion. In the period, the company opened 20 new shops and refitted 40.

The group also opened its second Greggs Moment coffee shop in Middlesbrough at the start of this month and has increased its range of products in frozen food retailer Iceland with eight more products.