THE odds on Morrisons winning the battle for rival Safeway were slashed by City bookmakers following a letter from a competition watchdog.

While the Competition Commission has yet to make any decision on offers for Safeway, the letter raised concerns about bids from Asda, Tesco and Sainsbury's, and their potential threat to competition.

The commission said the bid from Morrisons, which sparked the bidding war in January, could be "pro-competitive" because it would maintain four national supermarket players.

It went on to say that Morrisons was a good "match" for Safeway because the former operated primarily in the north of England, while Safeway was strong in the south.

But the Bradford chain would not comment yesterday on what it would do in areas such as Darlington, where it would hold a virtual monopoly of supermarket services if it took over Safeway.

The town boasts two sizeable Morrisons and two Safeway stores, with only Asda present from the other big three operators.

It is highly likely that it would be forced to sell off some of its stores in the town if it was successful.

The commission is examining whether any of the proposed deals would create an excessively dominant supermarket group to the detriment of shoppers and suppliers.

City bookie Cantor Index said it had cut odds on Morrisons taking over Safeway from 8/1 to 3/1, with Wal-Mart-owned Asda at 9/4.

Anthony Platts, retail expert with North-East stockbrokers Wise Speke, told The Northern Echo: "My own opinion remains unchanged from the onset of the bidding war - that Morrisons will ultimately win the day."

His opinion was backed by Rhys Williams, retail analyst at stockbroker Seymour Pierce, who said: "Morrisons is more likely to get through the most unscathed. The rest are likely to be blocked and it will not be worth their while pursuing bids."

Cantor has retail entrepreneur and Bhs owner Philip Green as favourite, at 7/4.

Mr Green has been given the all-clear from the Government but has yet to table a bid, so his potential takeover does not come within the remit of the investigation.

Morrisons began the fight for Safeway in January when it offered £2.9bn for the 479-store chain.

The commission hopes to give its judgement on August 12, but has the option to extend that date.

Its recommendation will go to Trade and Industry Secretary Patricia Hewitt, who is likely to take up to a month to finalise any decision.