Bakery group Greggs has forecast further price increases as it looks to cope with higher overheads, including rising wage and energy bills.

The North-East-based company, which has more than 1,200 outlets in the UK, said its selling price inflation averaged 2.1 per cent in the first half of the year but was now running at 2.4 per cent and likely to continue to rise.

Despite the upturn, managing director Sir Michael Darrington said trading remained strong with like-for-like sales up by 6.2 per cent in the past 18 weeks.

Stripping out the early part of the period, when comparisons were helped by the hot summer of last year, Greggs said sales were 5.4 per cent ahead.

Sir Michael said: "Our budgets assume that like-for-like sales growth will trend gently downwards over the remainder of this year, reflecting the steadily strengthening comparative performance in 2003."

He said profits in the year to date had been in line with expectations.