The circulation fall is accompanied by reports of further dissent within the newspaper's senior staff over a strategy to replace news with features at the front of the paper. In a desperate attempt to shore up the paper's monthly average circulation figures to the psychologically crucial 400,000 mark, the newspaper cut its price to 50p in the north of England on Sunday. It is believed that this led to a rise of more than six per cent.
Meanwhile, speculation is mounting that Guardian Media Group, which owns The Observer, is about to replace its editor, Will Hutton. The likely candidate to succeed him is thought to be Roger Alton, currently features editor of The Guardian and the man responsible for the paper's tabloid G2 section.
Morale within The Observer is said by insiders to be very low, caused chiefly by a division between Hutton and the paper's ambitious young deputy editor, Jocelyn Targett, who is working on radical plans to re-formulate the paper. Targett is known to favour a features-based approach to the newspaper.
Targett enjoys the support of Alan Rusbridger, editor of The Guardian, but his power base at the paper was weakened last week when Justine Picardie, a close ally, quit her position as editor of the newspaper's Life magazine section. She is moving back to The Sunday Telegraph as a contributing editor, but was one of the few confidants of Targett at The Observer.
The Guardian,meanwhile, took its senior editorial team away for a series of brainstorming meetings at the end of last week. Staff had hoped that on the agenda would be some measures to deal with the infighting at the Sunday paper.
The Guardian management is keen to keep Hutton, the hugely respected author of the economic study The State We're In and an acknowledged heavy hitter on matters of politics and policy. However, one of the criticisms of Hutton is that he is not a hands-on editor.
Earlier this year, Targett won a significant battle when he replaced Paul Webster as overall deputy editor of the paper, but many within The Observer's Farringdon Road headquarters say that Targett's brash, self- confident approach is one of the reasons behind the paper's decline. His cause was not helped by a glowing, personal obituary of Sir David English - a man The Observer refrerred to on Sunday as a "mendacious cheer-leader of Thatcherism" - in which Targett indirectly referred to himself several times as "a genius".
Guardian Media Group bought The Observer in 1993 from Lonrho for pounds 27m. It has already been forced to sack two editors and is not keen to do the same again. Yet the paper is thought to be losing more than pounds 10m a year, a substantial sum despite the group's pre-tax profits of pounds 53m last year from its holdings in TV, local newspapers and the magazine Auto Trader.Reuse content