The proposed merger between UK supermarket chains Sainsbury’s and Asda suffered a significant setback on Wednesday, after a report was published by the UK Competition and Markets Authority (CMA).

The watchdog investigating the proposed merger found that the deal could lead to “a substantial lessening of competition” for UK shoppers both nationally and locally.

The proposals, announced last April, would lead to the merged retailers having 2,800 stores and a 31.4% market share in the £190bn UK grocery market.

“We have provisionally found that, should the two merge, shoppers could face higher prices, reduced quality and choice, and a poorer overall shopping experience across the UK,” said Stuart McIntosh, chair of the independent inquiry group.

Options for addressing the CMA concerns have been set out and include requiring the supermarkets to sell off “a significant number of stores” or one of the Sainsbury’s or Asda brands.

Ultimately the deal looks likely to be blocked with CMA stating: “It is likely to be difficult for the companies to address the concerns it has identified.”