FUEL was poured on the bitter dispute over value for money between Tesco and Asda yesterday as a new price study by bankers found the bigger grocer to be Britain’s cheapest supermarket.

Goldman Sachs said that its study, which has been carried out monthly since December 2001, found Tesco to be cheaper than Asda for the first time.

The bank said that Tesco was more competitive in dry groceries such as pasta and frozen foods and also in fresh produce. However, Asda remains more competitive in drinks.

Both retailers are gearing up for a renewed round of price cutting next month after Asda was banned from promoting itself as “officially Britain’s lowest-priced supermarket”.

The companies have invested more than £200 million in price cuts so far this year and industry experts believe that there will certainly be more cuts to come next month.

Goldman Sachs’s survey for this month shows the two grocers neck and neck, with Tesco only 0.2 per cent cheaper.

Already the market leader, Tesco scored a victory over its closest rival after advertising watchdogs told Asda that its claim to offer shoppers the best value lacked evidence.

The Advertising Standards Agency ruled that Asda must stop using the “lowest-priced supermarket” claim because it was based on evidence from a survey by The Grocer trade magazine of only 33 everyday grocery items.

The industry’s weekly publication used the 33 goods, such as apples, courgettes, Cadbury Dairy Milk and Corn Flakes, to compare the leading chains.

Mark McCullough, food retail analyst at Goldman Sachs, said in a note: “We believe Asda’s extensive internal restructuring programme may have resulted in the new management taking its eye off the ball on pricing with Tesco successfully exploiting that weakness.”

He believes that Tesco will continue to pull ahead during the tough market conditions expected over the next six months. Asda is battling to attract new customers after Tesco, Britain’s largest supermarket, began cutting prices heavily at the start of this year and Wm Morrison, the northern supermarket chain, bought its bigger rival Safeway and immediately began slashing prices.

The latest market share figures, out this week, imply that Asda’s sales are growing at 3.2 per cent in the month to August 14, still ahead of the market average but well under Tesco’s implied growth of 13 per cent.

This month Wal-Mart, Asda’s American parent, said that underlying sales, which strip out the impact of new store openings, had not risen in the three months to July 31.