BOSSES from North-East-based bakery chain Greggs will meet with the Treasury today as the battle against "pasty tax" continues, warning the plans could lead to store closures.

Chairman Derek Netherton told shareholders at their annual general meeting Newcastle yesterday plans to extend the 20 per cent VAT to freshly baked goods were "unworkable" and would result in store closures, unemployment and reduced investment.

The bakery chain, which has 1,600 stores throughout the UK, will present his company's own proposal tomorrow to David Gauke, Exchequer Secretary to the Treasury.

The company's proposal is to charge Vat on all food kept hot for sale in a heated environment, as well as food re-heated to order and food supplied in heat-retaining packaging.

"Savoury sales are more than a third of our turnover, and the outcome of the consultation process could have a material impact on our sales and profits," he said.

"While we understand the Government's need to increase revenue, we fear the current proposal will have a disproportionate impact on the specialist bakery sector, resulting in further unemployment, high street closures and reduced investment," he added.

However, speaking to journalists later in the day, chief executive Ken McMeikan said he was unable to clarify how much they expected the proposals to impact the company but denied they were "scaremongering".

He said they owed it to their shareholders to let them know that the Government's plans could have a potential impact on sales and profit.

"Because of the whole definition of 'ambient air temperature' is a complex and unworkable, we are unable to say how much product would be subject to Vat.

"We think this is an opportunity for the Government to say they have listened and there is a better way to achieve what they set out to achieve, and also a better way for the customers and the industry.

"We are working very hard to make sure the plan we present to the Government is a better, more workable solution.

"It is something the whole bakery industry can come behind and back."

The chain has handed in a 300,000 signature petition objecting to the proposal and says it has the support of the National Association of Master Bakers, which represents around 1,000 smaller retailers, and the Cornish Pasty Association.

The bakery chain also said yesterday it had endured six disappointing weeks of trading due to recent heavy rainfall deterring customers from venturing on to the high street.

The group recorded a 1.8 per cent drop in like-for-like sales in the 19 weeks to May 12, but its aggressive store-opening programme helped lift total sales by 4.3 per cent in the period.

The group opened 25 new shops in the period and is on track to open 90 new shops by the end of the year.

It also completed 42 shop refurbishments in the period, in line with its target to refit between 100 and 120 shops this year.

It opened the second Greggs Moment coffee shop in Middlesbrough's Queen Street arcade, following the launch of a first coffee shop in Newcastle earlier this month, and plans three more coffee shops by September.

The group is set to open a second motorway services shop at Birch services on the M62 next month following the launch of its first in Cheshire.

The firm also reported its frozen food line, which is available in Iceland, has attracted interest from more than one supermarket chain.