UK's Ocado secures new capacity with Morrisons agreement

LONDON (Reuters) - British online supermarket pioneer Ocado has secured more operational capacity following a fire at one of its centres, after it agreed with partner Morrisons to take back sole use of one of its sites in London.

The two companies said on Thursday that Ocado would have sole use of its newest customer fulfilment centre (CFC) in Erith, south east London, until January 2021.

Ocado, which has championed online delivery since it was founded by three Goldman Sachs bankers in 2000, suffered a major fire earlier this year at its flagship robotic site in Andover.

The fire has hit Ocado's operational capacity to deliver orders.

Under the new terms of the agreement, Morrisons will return to the Erith CFC in February 2021. It will not incur start up or running costs before then and by the time it returns the new site will be operating at a higher capacity.

In the interim period Morrison's can grow its online business by fulfilling orders from its stores using Ocado's store pick solution.

The two companies have also agreed that Ocado will no longer be Morrisons' exclusive digital partner, giving Morrisons more flexibility.

"Our new agreement allows us to have more than one digital partner, and opens the way for significant potential opportunities and partnerships in this important growth area for Morrisons," Morrisons Chief Executive David Potts said.

Separately, Morrisons updated on trading, reporting a slowdown in quarterly sales growth.

(Reporting by Kate Holton, editing by James Davey)