A report commissioned by Tesco Ireland has claimed the Government regulations imposing a cap on the size of retail grocery outlets impede competition in the sector and are not in the customer's best interest.

The report, carried out by Peter Bacon & Associates Economic Consultants, said reliance on smaller stores of 3,000 sq m and under will create more urban sprawl, fail to meet consumer shopping needs and affect prices charged to consumers.

The 1998 planning regulations state that planning permission should not be granted for a supermarket with a retail floor exceeding 3,000 sq m. The more recent retail planning guidelines report recommends a wider limit of 3,500 sq m in the greater Dublin area.

The report said larger stores were less costly and more economic to operate, leading to lower prices.