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A legal challenge over the merger of HBOS and Lloyds TSB will take place this afternoon on the grounds the deal will stifle competition.

The Competition Appeal Tribunal (CAT) will hear the appeal from Merger Action Group (MAG) against the merger, which the group claims should have been examined by the Competition Commission.

Although the appeal will be heard in London, it will be held under Scots law.

The action group represents more than 500 shareholders, account holders,
businessmen and politicians who are opposed to the deal and believe it will be bad for Scotland's economy.

Sir Sean Connery is also against the plans for Bank of Scotland – which pre-dates the union of Scotland and England, but was established by an Englishman – to fall out of Scottish hands.

The James Bond actor stated he believed the deal was not in the best interests of Scotland.

MAG spokesman Malcolm Fraser, an Edinburgh architect and businessman, welcomed Sir Sean's resistance to the plans.

"The UK government has gone out of its way to discourage alternative interests to come into play for the future of HBOS," he said.

"Our primary concern – as recognised by the OFT report – is that the government ripped up the competition laws to allow this shotgun wedding between HBOS and Lloyds TSB to go ahead."

The group argues the original reasoning behind the deal – that HBOS would collapse without merging with a stronger bank – is no longer relevant since the government introduced recapitalisation measures.

HBOS has said it is "very confident of our legal case".

The case is expected to be concluded tomorrow at midday.