Milk is now cheaper than water in the UK

An escalating price war between the U.K.'s largest supermarkets means that the price of milk is now cheaper than bottled water, research shows.

Britain's big four grocers – Tesco, Morrisons, Sainsbury's and Walmart's Asda – have all slashed grocery prices over recent days in a bid to maintain market share in the competitive supermarket space.

UK BEEF AND DAIRY CATTLE
Suzanne Plunkett | Bloomberg | Getty Images

And – according to research by trade magazine The Grocer – fresh, own-label milk is now cheaper than some brands of bottled water on a pence-per-liter basis.

Looking at volume prices collated by Brandview.com, the price per liter of milk in supermarkets has dipped to 43p (65 cents), compared to 44p for water sold in larger packs and multipacks.

The price of milk began to fall last year as supermarkets ramped up efforts to attract customers with low prices - particularly in the face of increasing competition from German discount chains Aldi and Lidl.

While consumers stand to gain from milk price cuts, British dairy farmers said their income was being forced down by supermarkets. Many are leaving the industry as a result; the U.K.'s National Farmers Union (NFU) said that 60 dairy farmers gave up milk production in December alone.

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The chairman of the NFU's dairy board, Rob Harrison, said on Monday that price pressures on dairy farmers meant the job was like being a boxer "on the ropes and taking body blow after body blow – there's only so much you can take before throwing in the towel."

And the price of milk could be set to move lower, with at least one retailer – Asda – cutting milk prices even further.

"Four-pinters have been a key weapon in the price war," The Grocer said. "Suppliers fear another raft of retailer cuts after Asda this week slashed the price of four pints of own-label milk from £1 ($1.50) to 89p."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt.