Sir Graeme's surprise decision will force the Government to find a new chairman for the Competition Commission since Sir Graeme would have transferred into the job when the authority comes into operation next year and takes over the functions of the MMC.
However Sir Graeme, 63, told the President of the Board of Trade, Margaret Beckett, that he had decided to return to the private sector rather than serving out the remainder of his term, which was not due to expire until April 1999.
His intention to quit the MMC after just over four years in the job was known to Mrs Beckett's predecessor, Ian Lang, but the announcement was delayed first by the General Election and then by Labour's review of competition policy.
The Competition Bill published yesterday by Mrs Beckett will beef up the Office of Fair Trading, giving it the power to crack down on cartels and anti-competitive agreements by fining companies up to 10 per cent of their turnover.
As well as taking over the MMC's job of vetting takeovers and mergers, the Competition Commission will also act as a tribunal to hear appeals against penalties imposed by the OFT. The Restrictive Practices Court will be disbanded.
Mrs Beckett said she had accepted Sir Graeme's resignation with considerable regret.
Sir Graeme stressed that he supported the changes being introduced by Mrs Beckett and had only decided to leave so that he could end his career back in the private sector. He is looking for a non-executive chairmanship but stressed: "I have not put out any feelers yet, nor has anybody approached me."
Sir Graeme arrived at the MMC in April 1993 after a career spent in the construction and telecoms industry, culminating in the chief executive's job at Alfred McAlpine. It was only last October that he agreed to a two- year extension of his term from April this year.
But Sir Graeme said that in the months that followed he became convinced that if he was to get a job back in the private sector, he would have to leave the MMC before he reached 65.
During his tenure the MMC has handled 68 referrals, of which 54 have been published. Its advice has been ignored by the government four times - GEC's takeover of VSEL, which the MMC recommended be blocked, the two generators' bids for regional electricity companies and the Bass-Carlsberg Tetley merger, which the MMC cleared, and the break-up of British Gas's trading and pipeline arms, which was rejected.
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