The British government yesterday referred all the trade rivals bidding for Safeway to the Competition Commission leaving the field open for financial bidders to snap up the supermarket chain.

The surprise decision by Ms Patricia Hewitt, based on the advice she received from the Office of Fair Trading, saw Wm Morrison Supermarkets referred to the Competition Commission along with bigger rivals J Sainsbury, Asda/Wal-Mart and Tesco.

Morrison, which sparked the bidding war for Safeway when it announced a £2.9 billion (€4.3 billion) agreed all-share offer for the group in January, had been expected to get the green light to bid because it is so much smaller.

The only bid passed without a competition referral was that from Philip Green, the retail entrepreneur who already owns the Arcadia fashion group and the BHS department store chain.

The ruling should strengthen the hand of Mr Green, as it leaves him free to pursue his bid without competition from trade buyers, who can offer more because of cost savings they can wring from the business.

Last night, Mr Green refused to comment on his plans. However, yesterday's move could also tempt out other financial buyers such as Kohlberg Kravis Roberts (KKR) and Texas Pacific Group.

KKR, which said it was considering bidding for Safeway before pulling out, was understood to be considering its position again in light of the ruling. But people close to KKR said they thought it was unlikely to bid again. "The world has moved on," said one.

Financial bidders will also have been helped by yesterday's heavy fall in the Safeway share price as investors digested the news from the government and considered the damage an inquiry expected to last at least five months could do to the business. Shares in Safeway closed down 28¾p or almost 10 per cent at 265¼p.

Analysts said the price could fall further as Mr Green would be expected to put in a "low-ball" offer. "There is not a lot to under-pin the share price now," said one.

Ms Hewitt said the OFT had decided that the potential bids from Sainsbury, Asda and Tesco raised a "significant prospect" of a substantial lessening of competition on both a local and a national level.

The Morrison bid, meanwhile, gave "reasonable grounds" for fearing the same outcome. The Morrison bid, however, only raised issues on a local level. - (Financial Times Service)