Shoppers are set to see a fall in prices as supermarkets embark on a fierce new price war.

Competition sparked by the expected takeover of Safeway by Morrisons should save consumers £1 billion this year, retail analyst Verdict said.

This will amount to about £40 off the average household's annual shopping bill.

The study said a significant period of price-cutting would lead to the sharpest fall in grocery prices in more than a decade.

Richard Hyman, senior analyst at Verdict, said the £3 billion move by Morrisons, which is expected to be finalised by March, would force the other main retailers to lower their prices significantly.

Verdict's study predicted Sainsbury's would be the retailer under the greatest pressure.

Tuesday January 13, 2004