Wm Morrison Supermarkets said it would deliver 100 million pounds of savings for customers this Christmas as Britain's grocers step up the battle for cash-strapped shoppers.

Britain's fourth-biggest supermarket group said Tuesday it expected 1.5 million shoppers to use its Collector Card, which gives them 25 pounds off their Christmas shop if they spend at least 40 pounds in each of six previous shops.

That would be up from 1.3 million last year and account for about 37 million pounds of the investment, it said.

The rest would be spent on promotions and price cuts, chief executive Dalton Philips said on a store tour in north London.

Competition among Britain's grocers appears to have stepped up since market leader Tesco announced a 500-million-pound investment in lower prices in September.

Data Tuesday showed an easing in UK food price inflation, which industry body the British Retail Consortium said was partly due to the grocery price war.

But Philips said Morrisons' investment, while up on last year, was within its budget and would not hit profit margins.

He also cautioned against assuming the worst was over for food price inflation.

Until we can see what's going to happen in oil it's too hard to call, he told reporters.

Britons' disposable incomes are being squeezed by higher prices, muted wages growth and government austerity measures, and they are also worrying about falling house prices, job security and a fragile economic recovery.

Shoppers are feeling bruised with many telling us they'll spend less in the shops this festive season, Philips said, adding one in four Morrisons customers had said in a survey they expect to dip into their savings to pay for Christmas.

He urged the government to scrap a planned rise in fuel duty in January as a way of easing some of the pressure.

Morrisons has outperformed sales growth of its larger rivals for most of the past few years, helped by its focus on low prices and fresh foods.

Last week it reported a 2.4 percent rise in underlying third-quarter sales, compared with a 1.3 percent increase posted by Asda Tuesday.

(Reporting by Mark Potter; Editing by Hans-Juergen Peters)