The Government has accepted the Competition Commission’s recommendation that an agency be created to regulate grocers’ relationships with suppliers.

Consumer minister Kevin Brennan said a consultation will being next month, soon after the groceries supply code of practice comes into force on Febraury 4, on the creation of an ombudsman and its powers.

Brennan said: “Free and fair competition is the key to a healthy market and it is right that there should be an enforcement body to make sure that consumers are getting the best value for money.

“We do not anticipate a significant impact on consumer prices or workers resulting from the creation of an enforcement body. It is not a question of whether a body is needed, but exactly how that body will operate.

“The next step is to consult formally on its nature and role, to ensure that all interested parties can make their views heard and that informed decisions are made.”

But the British Retail Consortium reacted angrily to the decision. BRC director General Stephen Robertson, said: “This would tip the balance of negotiating power in favour of multi-national food manufacturers allowing them to drive up the prices customers pay.

“This is not about farmers, very few deal directly with supermarkets. The UK grocery market is worth £130 billion a year. If threats of involving an ombudsman allow big food companies to squeeze even 0.1 per cent more out of supermarkets, that’s £130 million extra on customers bills.   

“It’s disappointing that the Government has decided to pursue this despite the lack of evidence that it is needed. There is already a supplier code, overseen by the Office of Fair Trading (OFT) and offering the right to independent arbitration. It has long been compulsory for the big four supermarkets and is being extended to more retailers next month.

“OFT chief executive John Fingleton has said supermarkets are pro-consumer, bringing lower prices, innovation and new services and an ombudsman is not necessary.”