Morrisons has renegotiated a new deal with Ocado to allow the supermarket to deliver nationwide and slash the fees it pays the online grocer.

Shares in both companies rose on the back of the news with Ocado up by 3.15pc, or 8.6p, to 284.9p and Morrisons climbing 2.2pc, or 4.13p, to 192.2p at midday.

The new contract allows Morrisons to pick products for home delivery from its own stores, using Ocado's technology, which will double the areas it can reach.

It will also increase the number of non-food brands it sells online by offering customers products, such as Playmobil and Vtech toys, which are currently available on Ocado but not at Morrisons.

Morrisons' former chief executive Dalton Philips originally signed a 25-year-long contract with Ocado in 2013 which analysts dubbed the "biggest transfer of value" after the online grocers' shares rose by a third and those of Morrisons sank.

The contract has been one of the biggest bugbears of new Morrisons' boss, David Potts. He has voiced his displeasure at having an online service that failed to serve parts of the country, such as Scotland, where the supermarket chain had lots of shops but no capacity for online deliveries. 

While Ocado had downplayed the chances of the contract being renegotiated, Mr Potts boosted his bargaining power by agreeing a side-deal with Amazon to provide fresh groceries and own-brand products for its Amazon Fresh assault on the UK market. 

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