The editor of the Daily Mirror has admitted that phone hacking may have been the source for the tabloid's story that Sven-Goran Eriksson was having an affair with Ulrika Jonsson.

Richard Wallace, who was appointed editor of the paper in 2004, made the admission while giving evidence to the Leveson inquiry into press ethics on Monday. He had previously been show business editor.

Asked whether phone hacking was a tool that had been employed by journalists on the showbiz desk Wallace said: "No, not to my knowledge". However he said that "it might well have been" hidden from him.

Wallace was asked whether the award-winning 2002 scoop about Eriksson and Jonsson could have come from phone hacking he said: "It's possible, yes."

Trinity Mirror, the paper's publisher, has previously denied the accusation that Jonsson's phone was hacked.

"All our journalists work within the criminal law and the PCC (Press Complaints Commission) Code of Conduct and we have seen no evidence to suggest otherwise," it said in a statement.

In December a former financial reporter for the Daily Mirror, James Hipwell, claimed hacking was was widely used by reporters at the paper.

"I would go as far as to say that it happened every day and that it became apparent that a great number of the Mirror's showbusiness stories would come from that source. That is my clear memory," he said.

"One of the reporters showed me the technique, giving me a demonstration of how to hack into voicemails," he told the inquiry.

Appearing before the inquiry last year, Wallace's precession Piers Morgan also denied he had any knowledge of phone hacking taking place while he ran the paper.

Morgan also specifically denied listening to Jonsson's voicemails.

Speaking at the inquiry on Monday, Wallace also apologised to Chris Jefferies, who was wrongfully arrested on suspicion of murdering of architect Jo Yeates. At the time the Daily Mirror published a series of front page headlines focused on his arrest.

"I wish to express my sincerest regret to Mr Jefferies, his family and friends who had to see this unfold," he said.

"We obviously caused him and his nearest and dearest great distress which I regret, personally, greatly and I regard it as a black mark on my editing record."