Pub group Greene King’s bid for rival Spirit Pub Company has hit problems after the UK’s competition watchdog said that the £775 million deal could hurt competition in the sector.

Initial findings by the Competition and Markets Authority (CMA) revealed that approximately 1,000 Spirit pubs overlap Greene King pubs in some way.

The CMA will now refer the bid for an in-depth probe unless significant changes are made to make it more competitive in the next five days.

Sheldon Mills, the CMA senior director of mergers, said: “In a small number of areas, we found that after the merger the parties would operate pubs in close proximity without facing sufficient competition from rivals and we are concerned this could lead to a rise in the price of food or drink or a reduction in the quality of those pubs.”

Greene King chief executive Rooney Anand called the CMA's decision "sensible". He said: "We are confident we will be able to offer suitable undertakings, which will keep the number of pubs we need to sell to a minimum and allow the acquisition to complete before the end of June."

The CMA is the leading authority on competition in the UK following the closure of the Competition Commission in April 2014.