Alicia Wylie examines whether Britain's major supermarkets wield too much power over consumers and suppliers and considers what government can do to tackle the situation.

Ask an expat what they miss about the UK and you won't be surprised to hear it's not the weather. But you may be surprised that something many Brits abroad do miss is their supermarket.

European supermarkets just do not provide the range of fresh food offered by Asda, Sainsbury, Safeway and Tesco. Try to get Asparagus out of season even in a hypermarket in the Dordogne and the best you can hope for is a rather limp, stringy, variety in brine.

There can be little doubt that British supermarkets offer customers fantastic choice and usually at very low prices. But is this cut price convenience coming at too high a social cost. Are our powerful supermarkets causing the destruction of our local economies?

These concerns are not new but with the battle to take over Safeway hotting up among the big five food retailers (Tesco, Morrisons, Sainsbury, Safeway and Asda), it is more important than ever to assess these issues and what, if anything, needs to be done to curb their power.

The Competition Commission is currently examining whether any of the proposed bids will create a supermarket group that has too much power and that, as a result, could have a negative impact on shoppers and suppliers. The inquiry, headed by Sir Derek Morris, is due to report its findings by August 12, giving the Commission three months to sift through the deals and the potential impact of approving each one.

A major consideration for the inquiry is the market share the bidders have already mopped up. A recent report by analysts ACNielsen revealed that Tesco has consolidated its position as the UK's largest supermarket chain. Helped no doubt by its takeover of local convenience stores operator T and S, waved through without a murmur by the OFT last December, Tesco's market share has grown by 0.3 per cent over the past year to 22.8 per cent.

Sainsbury - the second largest chain - is way behind, falling 0.9 per cent to 15.9 per cent. Asda is in third place with 13.9 per cent, a rise of 0.4 per cent over the year. Safeway's share of the market is now nine per cent while Morrisons takes fifth place, increasing its share by 0.3 per cent to 5.3 per cent.

ACNielsen estimates that British households now spend £52.9 billion a year in supermarkets and if Safeway is swallowed up by one of the other major retailers, just four food chains will control almost 70 per cent of the market. And that is unlikely to be the end of the consolidation story. Many City analysts expect that in a few years we will have only three supermarket chains to choose between. So whoever is left in fourth place after Safeway disappears is left looking pretty vulnerable.

How long will it be before City institutions start putting pressure on the board to seek a partner to "create value" for shareholders? Takeovers, particularly if contested, usually mean big share price gains for the target company's shareholders. At a time when the City is desperate for some good news to encourage disillusioned private investors back into the market and to boost their annual bonuses, such takeovers are mouth-wateringly attractive.Does any of this really matter if British consumers get such a good choice of food and cheap prices? Well yes. For what supermarkets' increasing profits give to shareholders with one hand, they take away from our local communities with the other.

No one can fail to notice that the village shop has become an endangered species as supermarkets' power has increased. A report released by the New Economics Foundation in December warned that Britain's villages and cities were turning into ghost towns. It claimed that around 28,000 shops were likely to close over the next five years as a result of globalisation. These fears have been heightened by OFT plans to deregulate pharmacies, which could easily lead to supermarkets gobbling up yet another part of the retailing industry.

The NEF estimates that if they follow the trend of other local services in Britain that have succumbed to larger scale, remote retailers we would lose about four per cent of these essential health service providers a year, or more than one a day. Now the NEF, together with other groups such as the National Federation of Retail Newsagents, has formed a coalition called "Local Works" to halt the decline of Britain's local economies.

Its not just local shops that suffer. Food producers are affected too. Want to cut the price of apples below your competitors? Don't take the money out of your own pockets - force the fruit growers to pay for it. Tesco's promise to cut prices in Safeway stores by 11 per cent if its bid gets approved looks pretty ominous in this context.

Last year the big four supermarkets signed a code of conduct with suppliers after the Competition Commission found evidence of malpractice. Yet food producers are too worried about being struck off the supermarkets' supply lists to complain, particularly when there is an increasing trend for supermarkets to source goods from overseas. Lets hope the OFT's decision to review the Code will give it some sharper teeth.

Brian Revell, National Organiser for Food and Agriculture at the Transport and General Workers Union, says: "There is nothing wrong with power if it is used responsibly. Some supermarkets, such as Sainsbury's, do try to buy British but for others its just about price.

"Ministers have said, for example, that they cannot see any reason why sugar cannot be produced in Zambia rather than the UK. That is an amazing statement considering the effect such a move would have on British jobs. Policymakers do have a responsibility to protect local economies."

Revell says, however, that the government does at least consult with the industry. That's a big change from the previous Conservative governments' approach. The question is whether policy-makers act on the concerns these meetings raise or whether they are just for show.

The government's strategy for food and farming, published in response to The Curry Commission's 2002 report, does not give the impression that New Labour is really listening. When the Curry report came out campaigners such as FARM argued that the proposals would only delay the decline in family farming and that farmers need a fair price for their produce that covers their costs.

The percentage of the price we pay for food that ends up in the hands of the farmer has been falling for more than 10 years to just 20 per cent of the total.The National Farmers' Union says that in the last year more than 15,000 people have left farming and UK farming incomes have dropped 42 per cent against a rise of 34 per cent in German farmers' fortunes. These critics have argued that the government's proposals, which include a £500 million rescue package as recommended by Curry, do little to tackle the power of the supermarkets, apart from reviewing the supermarkets' code of practice once every six months.

It may be too late to stop Safeway being gobbled up by one of the other big chains but it is not too late for the government to demonstrate its support for local economies ahead of global big business and the bottom line.

Unions, farmers and rural communities are now just waiting to find out if it is too chicken to do so.