Good news for the pockets of shoppers but possibly not for staff or those many small suppliers is the verdict on the proposed merger of two of the country's biggest supermarkets.

Initial reaction to the merger proposed by Sainsbury's and Asda has been that while shoppers may come out of any such deal quids in, the small businesses supplying the chain could be the ones paying the price.

Widely seen as the two businesses strengthening their positions relative to bigger rival Tesco and preparing themselves for a world in which Amazon rules, the deal is said to have been agreed in principle.

If it goes ahead it would see a new company Anglo-America company emerge with combined revenues of around £51 billion.

Mike Cherry, chairman of the Federation of Small Businesses (FSB) National, sent his warning shot: "A merger of this size will concentrate a lot of power in the hands of one giant company, and it's important that power isn't misused to coerce small suppliers into accepting unfair contracts and poor payment terms.

"Those at the top of Sainsbury's and Asda should explain how they plan to merge these two supply chains fairly, and give reassurance that cost savings won't be achieved simply by milking their small suppliers for all they're worth.

"When investigating this proposed merger, the Competition and Markets Authority should be looking for cast-iron commitments that a positive standard will be set for working with smaller suppliers."

Ian Mean, Business West director for Gloucestershire, said: "My initial feeling about the merger is obviously potentially good news for the shopper with lower prices but there must be concern for producers and staff.

"The big question, of course, is that how are they going to make the numbers work? I think that is going to be fairly simple—bigger buying power, less staff and fewer stores.

"My main concern is the inevitable squeeze on suppliers—that always happens, especially with the farmers and food producers.

"I have listened to the chief finance director of Sainsbury's on Sky saying there would be no job losses—I doubt that.

"And what I fear now is that Amazon-waiting in the wings on food retail in the UK-may well pounce to buy Morrisons to create a huge free for all in the supermarket arena."

Judith McKenna, president and chief executive officer of Walmart, which owns Asda, told Retail Gazette: "We believe this combination will create a dynamic new retail player better positioned for even more success in a fast-changing and competitive UK market.

"It will unlock value for both customers and shareholders, but, at the same time, it's the colleagues at Asda who make the difference, and this merger will provide them with broader opportunities within the retail group."