Sir; John Noble (Letters, 23 September, p26) asks why the margins of British food retailers are higher than those of Continental retailers.

The Competition Commission's 2000 report on supermarkets reveals that in the late 1990s UK gross margins were higher on average than their Continental counterparts because of the higher penetration of retailers' UK own brand products. This, reflects superior product innovation. The capital costs of buying land and building stores were higher in the UK.

Second, while the average operating margins of the Continentals were increasing during the late 1990s, those of the UK supermarkets were falling to a point where the gap between them was a mere 0.3% (5.0% for the UK, 4.7% for Continentals). Since then the UK average has continued to fall and the gap has disappeared.

Third, the report shows that the UK supermarkets' average return on capital employed was 3% lower than the Continentals were reporting.