Yahoo Finance Express and Star newspapers braced for cuts as takeover approved
The takeover of the Express and Star newspapers by Reach, the publisher formerly known as Trinity Mirror, has been waved through by the Government, clearing the way for sharp cost-cutting.
Matt Hancock, the Culture Secretary, said he would not refer the deal, agreed in February, for a full investigation after receiving advice from Ofcom and the Competition and Markets Authority (CMA).
The media regulator had been asked to assess whether the takeover of two right-wing titles by the publisher of the left-leaning Daily Mirror would lead to less political choice for readers or restrict free expression. Ofcom found no such threat, Mr Hancock said.
Competition authorities, which in more lucrative times for the newspaper industry stood in the way of mergers, found there was no realistic prospect of a substantial lessening of competition as a result of the merger.
The combination of Reach, which publishes the Daily Mirror, Sunday Mirror and Sunday People as well as a slew of regional titles, with the Express and Star created Britain's second biggest national newspaper publisher behind Rupert Murdoch's News UK. Reach has overtaken DMGT, the publisher of the Daily Mail.
Mr Hancock's decision not to demand a full investigation will come as a relief to Simon Fox, the chief executive of Reach, although he has maintained throughout that he expected the deal to be approved after a short delay.
The publisher has already paid Richard Desmond, the former owner of the Express and Star, nearly £130m in cash and shares and agreed to pump £70m into underfunded pension schemes.
The threat of an intervention on public interest or competition grounds meant Reach was blocked from making any of the cost cuts that were central to the financial logic of the takeover. Mr Fox is now free to strip out £20m by 2020. He has said that the axe will fall on newsrooms as well as administrative and production functions.
Sport and features articles are due to be shared across titles, for instance. Under Mr Desmond, the Express and Star were heavily reliant on journalists on casual contracts with limited redundancy rights.
Michelle Stanistreet, general secretary of the NUJ, said: "Full and meaningful consultation with the NUJ is vital to address the concerns of staff following a period of significant uncertainty and anxiety over what cuts may be planned as part of the cost savings already identified. Preserving jobs and tackling casualisation of roles will be our priority in those talks.
“We will continue to engage with the company about how editorial standards will be maintained, at the same time as ensuring titles have the necessary resources to preserve their distinct editorial voices with enough journalists to do that work properly. “
Mr Fox has claimed that it would be "absolutely ridiculous" for Reach to shift the politics of the Express and Star to align them more closely with the Daily Mirror, however, and pledged that their Westminster teams will not be merged.
Cost cutting is at the centre of Mr Fox's battle to maintain profits as Reach suffers in a brutal market for tabloids and local newspapers. Revenues were down 9pc in the first four months of the year, as digital growth fails to match the decline of print circulation and advertising.
Reach is attempting to build a vast audience online in hopes that digital advertising will make up the shortfall. There are growing doubts among publishers that free-to-access websites and apps can fund journalism, however.
MailOnline, the biggest UK newspaper website, is unprofitable and has suffered a decline in traffic due to its dependency on visits from Facebook. In response to political controversy the social network recently altered its policies to reduce the amount of material from outside publishers it shows in favour of updates from friends and family.
The industry analysts Enders recently told publishing clients that trends "strongly imply that the race for scale is more an investor fallacy than a sustainable business prize".
