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The UK’s competition watchdog has provisionally cleared key aspects of the proposed merger between Associated British Foods (ABF) and Hovis, while raising specific competition concerns in Northern Ireland, according to its interim findings.

The independent inquiry group leading the Competition and Markets Authority (CMA) Phase 2 investigation concluded that the transaction would not substantially lessen competition in Great Britain, largely because ABF’s bakery arm would likely exit the market if the deal does not proceed.

ABF, which owns the Kingsmill brand, operates Allied Bakeries (AB) – a major supplier of both branded and private-label bread products. It competes with players including Warburtons and Hovis in a market that the CMA's evidence showed as being in long-term decline.

The regulator has observed persistent downward pressure on the sector, driven by shifting consumer preferences away from traditional wrapped bread, alongside rising energy, wheat and distribution costs, and margin compression from private-label demand.

The inquiry group found that Allied Bakeries has been loss-making for more than a decade, with ABF funding sustained deficits amid restructuring efforts.

Against this backdrop, the CMA has provisionally concluded that Allied Bakeries would likely cease operations in Great Britain without the merger, meaning competition between AB and Hovis would be lost regardless of the deal.

While the merger appears acceptable in Great Britain, the CMA identified a different competitive dynamic in Northern Ireland.

The inquiry group found that an alternative buyer could have acquired Allied Bakeries’ Northern Ireland operations and continued to compete with Hovis. As a result, the proposed merger raises localised competition concerns in that market.

In a statement, a spokesperson for ABF said: “The CMA’s Interim Report is welcome recognition that, against a challenging financial backdrop for the wrapped and sliced bread sector, this transaction will help to deliver a far more effective competitor that will be able to invest in innovation and growth, to the benefit of consumers and the wider UK economy.

"We have been clear with the CMA that the transaction is the only route to creating a sustainably profitable business. The CMA has recognised that, if the transaction is not allowed to proceed, Allied Bakeries will be unable to continue operating under current market conditions. We will continue to engage constructively with the CMA, including with regard to our Northern Ireland business, so that we can achieve regulatory clearance as efficiently as possible.”

ABF and Hovis are now working with the CMA on potential remedies. ABF has already initiated a sales process for its Northern Ireland bakery business as part of efforts to address regulatory concerns.

The CMA has invited both parties to submit formal remedy proposals within 14 days, which will then be subject to public consultation. A final ruling on the transaction is expected by 24 June 2026.