Co-ops have come under pressure from large supermarket chains

Manchester-based Co-operative Group and Rochdale-based United Co-operatives did not give any reasons for the move.

The UK's retail market has become more competitive as large supermarket chains have cut prices and cross-sold products such as CDs, electronics and clothes.

A merger between the two co-operatives would create a group with more than 4,000 outlets, offering services from banking to funerals to shoe repairs.

"The boards of the Co-operative Group and United Co-operatives have agreed to discuss the possibility of a merger between their two societies," the groups said in a statement.

"Talks have commenced and a further statement from the two boards will be issued when they conclude."

Changing market

The Co-operative Group is the UK's largest, with an annual turnover of �8bn. United Co-operatives earns �2.5bn a year.

Co-operative retailers had a 20% share of the British grocery market in the 1950s, but have lost ground to supermarkets and that market share has now shrunk to closer to 6%.

In general, co-ops are owned by customers and employees who have chosen to become members by investing a minimum of �1.