Crawshaw fears recovery could be wrecked by the ‘pasty tax’

The company reported lower profits and sales in the year to the end of January, as cash-strapped customers cut back on its products.

Yesterday the Rotherham-based company said while recent trading has recovered, delivering small sales increases, the planned introduction of VAT sales tax on many of its products could set it back.

“It’s devastating,” said chairman Richard Rose. “We see it as a tax on the hard-pressed family’s evening meal.

“I find it very unfair that small format high street food retailers and hard-pressed families and pensioners are being targeted in this way.”

The Government in March announced plans for a 20 per cent sales tax on fresh foods that are sold warm or hot. Dubbed the ‘pasty tax’, it is consulting on the levy on food sold at “above ambient air temperature”. It is to come into force in October and has met vocal opposition from bakery chains including Greggs and the National Association of Master Bakers.

Mr Rose said the tax will force it to hike the price of products including cooked chickens, roast beef joints and hot pork knuckles. These make up 38 per cent of its sales. He said most of its customers take home the hot meat for their evening meal, saving on cooking costs.

Mr Rose has written to the Prime Minister and the Treasury, but said he is yet to receive a reply. Crawshaw is also collecting signatures in store to deliver in a petition to Government.

“It’s impossible to tell (the impact) at the moment,” he said. “It’s going to make life difficult for us. We hope that customers will remain loyal and carry on buying from us. We’re thinking about what additional products we can launch.”

Crawshaw, which runs 20 butchery shops across Yorkshire, Lincolnshire, Nottinghamshire and Derbyshire, posted a four per cent like-for-like sales fall in the year to the end of January. Total sales slipped one per cent to £18.9m as trading deteriorated amid a tough consumer climate.

The company barely broke even at a pre-tax level, after earning profits of £0.6m a year earlier.

“We’ve had to discount, we’ve had to give customers more value and when prices have gone up we’ve had to ride that,” said Mr Rose. “It’s squeezing margins.”

However, Crawshaw said fourth quarter trading improved two per cent year-on-year thanks to innovations such as broadening its product range and recruiting a marketing manager.

The company also introduced packs of meat for £5, plus five packs of barbecue meat for £10.

Despite higher fuel and energy costs, Crawshaw said like-for-like overheads have fallen marginally as it improves efficiency.

The positive growth trend has continued since the end of January, with like-for-like sales increasing three per cent.

However, Mr Rose said after delivering a return to profitable growth, the hot food tax has “undermined my confidence”.

The company said it has decided medium and larger stores deliver the best returns, so is selling its smallest new store in Bramley, Leeds, plus ceasing its mobile trailer. Mr Rose said the group will not open more stores until it has greater certainty.

Analysts at house broker WH Ireland said Crawshaw’s valuation is “undemanding”, and increased their target price to 3p from 2.5p.

But its shares fell 13 per cent to close at 2.5p.

Analysts added: “Whilst strategic changes are driving improvements in the business, our forecasts remain cautious given the well-publicised UK ‘pasty tax’.

“Despite an unchallenging valuation, the uncertainty surrounding VAT reforms and high street trading leads us to remain cautious.”

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