Greggs shares jumped 6.5% this morning to 498p after Chancellor George Osborne was forced into a U-turn over the pasty tax.
Osborne will reverse plans to charge VAT on hot takeaway food that cools down after being cooked, such as sausage rolls and pasties, following weeks of protest.
Sales of savoury food represent over a third of Greggs' turnover and analysts said the tax would have had a material impact on the baker's sales and profits.
Jonathan Pritchard at Oriel Securities said this was good news for Greggs but the company had other hurdles to overcome, such as the rising cost of pork. He said the inevitable rally on the back of the news offered a good opportunity to "sell" the shares.
Wayne Brown at Canaccord Genuity, however, raised his rating to buy on valuation grounds. He said: "The government's U-turn on the proposed pasty tax sees the removal of significant financial and strategic risk for Greggs."
