The boards of Barratt Developments and Redrow agreed a merger deal in February, a move which would create a mega housebuilder turning over £7.45bn and delivering over 22,600 homes a year.

Having concluded a detailed Phase 1 investigation into the deal – which included assessing competition on the national level and in local areas across Great Britain – the CMA found competition concerns in the area around Whitchurch, Shropshire, which includes nearby towns such as Nantwich, Ellesmere and Market Drayton.

The watchdog found that both housebuilders currently hold a high combined share of land in the catchment area centred around the Barratt development at Tilstock Road, with the addition of Redrow’s development at Kingsbourne in Nantwich.

If the deal goes ahead, the CMA found that it could lead to higher prices and lower quality homes for homebuyers in this catchment area. However, the CMA found that once the deal is complete, the merged business will continue to face competition from rivals nationally and in all other overlapping local areas (including from other large and smaller regional housebuilders, with additional constraints coming from homes sold via the second-hand market).

While this deal did not raise UK-wide competition concerns, the CMA said it is aware there may be further consolidation amongst housebuilders in the UK and committed to carefully assessing mergers in the housebuilding market further, both on a national and local level.

Barratt and Redrow now have the opportunity to submit proposals which address the CMA’s concerns in the local area around the Tilstock Road development, to avoid the deal moving to an in-depth Phase 2 review.

Joel Bamford, executive director for Mergers at the CMA, said: “Prospective homebuyers must not be disadvantaged as a result of deals like this one – with the potential loss of competition leading to even higher house prices or lower quality homes.

“Our initial investigation found concerns specifically in one area in and around Whitchurch, the companies now have the opportunity to agree workable solutions which address our concerns rather than move to a more in-depth investigation.”

The Phase 1 decision is separate from the CMA’s ongoing Competition Act 1998 (CA98) investigation into eight housebuilders – including Barratt and Redrow – over suspected sharing of competitively sensitive information.