A supermarket ombudsman could cost UK consumers "millions of pounds" in higher prices and hand negotiating power to the largest food makers, the British Retail Consortium (BRC) has warned.

Consumer minister Kevin Brennan this morning announced (13 January) that he had accepted the UK Competition Commission's recommendation for a body to enforce the Groceries Supply Code of Practice, which will involve the creation of an ombudsman.

Reacting to the Government's plans, the BRC said this would be the only example of an ombudsman set up to "favour corporations over customers".

"This would tip the balance of negotiating power in favour of multi-national food manufacturers allowing them to drive up the prices customers pay," director general of the BRC, Stephen Robertson said. "This is not about farmers; very few deal directly with supermarkets, and it's not about a 'mere' GBP5m of extra costs."

Robertson added: "The UK grocery market is worth GBP130bn a year. If threats of involving an ombudsman allow big food companies to squeeze even 0.1% more out of supermarkets, that's GBP130m extra on customers' bills."

The food manufacturing sector and farmers organsiations have welcomed the Government's plan to introduce an ombudsman but the proposals have raised the hackles of certain retailers.

Lucy Neville-Rolfe, executive director of corporate affairs at Tesco, welcomed the Government's proposal to consult on the plans but said she was "unconvinced" of the case for an ombudsman given the strengthening of the code governing the relationship between suppliers and retailers.

"Our daily experience, not least during the difficult weather, is of strong co-operation with our suppliers. We work together to deliver value and innovation for our customers and don't need more regulation. This proposal risks increasing prices at a difficult time with the main beneficiary being the large multinational suppliers," Neville-Rolfe said.

The Food and Drink Federation (FDF), however, backed the plan for an ombudsman, which it says will help smaller businesses in the food chain.

"We look forward to working with the Government to ensure this new organisation operates as an effective, low cost monitoring and enforcement body," Melanie Leech, director general of the FDF said.

The National Farmers Union also congratulated ministers, describing the announcement as "a victory for common sense and the consumer".

NFU president Peter Kendall said the decision was the result of "hard work and lobbying" by the NFU over the past ten years.

"We've worked incredibly hard to make this a reality," said Kendall. "Although the consultation period means that farmers and growers will still have to wait for the introduction of an ombudsman, we can at last see light at the end of the tunnel. 2010 must be the year we begin to eradicate unfair dealing and protect investment and innovation in British agriculture for the benefit of consumers."

Dr.Tom MacMillan, executive director of the Food Ethics Council, said the Government must now ensure it listens to "small producers as well as big businesses".