Local newspapers could lose up to £3.6m a year in advertising revenue under government proposals to change the rules on advertising company insolvencies.
The Department for Business, Enterprise and Regulatory Reform is looking to scrap the requirement for companies to advertise creditors’ meetings in two local newspapers when firms go into liquidation.
The proposal is part of a broader package designed to reduce the “bureaucratic burdens” on failing companies – saving an estimated £17m a year. It has been strongly opposed by the regional newspaper trade body, the Newspaper Society.
Under the current rules, when a company goes into voluntary liquidation, it is required to advertise the date and venue of a creditors’ meeting at least once in two local papers circulated in the area where the company has its “principal place of business”.
The government wants to remove this requirement and allow individual companies to decide whether advertising in newspapers is needed.
Business and enterprise minister Pat McFadden told parliament that the current requirements – which are about 100 years old – are outdated and ineffective in an age when companies do business in more than one area.
He said insolvency ads in the regional press cost about £300 each.
“Our concern is to make sure the advertising is done in the most effective way,” McFadden said.
“It will potentially save money by reducing costs. It is important to ensure that where money is spent it is spent usefully.”
Brian Binley, the Conservative MP for Northampton South, said the government had expressed concern about the state of the regional press – but seemed keen on taking more revenue away from it.
“Insolvency notices are a sizeable part of many of our local papers’ income,” he said.
John Hemming, the Liberal Democrat MP for Birmingham Yardley, said it was not clear whether taking advertising away from newspapers towards other sources such as the internet would be effective.
“The government has decided that we are going to use our power to force through this change,” he said.
“The question is whether alternative advertising techniques would be a better way. We have not been given the evidence on which to make this decision.
“In a time when local newspapers are suffering financially, we’re going to take £3.6m off them.”