Morrisons fuels the war on prices

SUPERMARKETS group Morrisons will celebrate tomorrow's £3bn merger with Safeway with price cuts on 800 products.

The move will fuel expectations of a price war, particularly as rivals Asda and Tesco have already announced millions of pounds in cuts.

Richard Hyman, chairman of retail consultancy Verdict, said: 'There is no question that Morrisons will significantly improve Safeway's performance and will capture market share from others. Life will be a lot tougher in the grocery market.'

Some industry experts predict that the battle could knock £1bn off food prices this year, though others have played down the importance of discounting, saying the main issue for Morrisons is integration.

Morrisons, which has 109 stores mainly in the north of England, is acquiring a further 479 Safeway outlets, most of them in the south.

As well as getting to grips with different IT systems, warehousing, supplier bases and corporate cultures, chairman Sir Ken Morrison also has to tackle the issue of Safeway's head office in Hayes, Middlesex, which employs about 1,200 staff and has been earmarked for closure.

If, as expected, Morrisons begins a 90-day consultation process tomorrow over mass redundancies, it will have to move quickly to retain key staff seen as essential to a smooth integration.

Richard Hull, head of retail at consultant Cap Gemini Ernst & Young, said: 'This will be one of the most challenging integrations in retail. The whole process will require significant management input.'