Mail to axe distribution deal with the Barclays' 'Business'

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The rivalry between the Barclay brothers and Associated Newspapers intensified yesterday when The Mail on Sunday confirmed it was ending a deal to distribute the entrepreneurs' troubled financial paper The Business.

Lord Rothermere's Associated group, which is reportedly preparing a £500m counterbid for the Daily Telegraph and Sunday Telegraph to thwart the deal struck by the brothers to buy Conrad Black's newspaper empire, said it was stopping the arrangement because of disappointing sales figures.

About 160,000 copies of The Business have been distributed for free by being inserted into copies of The Mail on Sunday since last November. The deal was widely seen as the salvation of the Barclays' paper by dramatically increasing its circulation to 287,299, a rise of 32 per cent in a year.

The decision to end the tie-up will create significant difficulties for The Business and its publisher, Andrew Neil, which had been selling about30,000 copies in Britain and a further 70,000 sold abroad or given away to hotel guests or air travellers.

Senior executives at Associated yesterday said the arrangement with the Barclays, which saw The Business distributed in plastic bags to supermarkets and retailers across Greater London, would end in April. But the group denied the move was a tactic calculated to tighten the screw on its rivals for the Telegraph titles, saying the decision had been taken on 13 January ­ five days before the Barclays announced their £253m deal to take a controlling stake in Hollinger Inc, the company through which Lord Black owns his newspaper group.

A spokesman for The Mail on Sunday said: "The decision was taken purely on commercial grounds. We had anticipated a sales uplift from this arrangement but regrettably, because of the costs associated with distribution, we no longer feel that the commercial argument stacked up."

The ending of the distribution deal is the latest twist in the fraught history of The Business, which was bought by the Barclays in 1997 for £100,000 as the Sunday Business and is estimated to have run up losses of £40m over the years.

The agreement with The Mail on Sunday, which paid the distribution costs, was seen as an audacious attempt by Mr Neil to save the paper by increasing its readership among the sought-after ABC1 social groups.

Neither The Business nor Mr Neil was prepared to discuss the Associated decision and what it means for the future of the paper last night.

Associated and the Barclays became rivals for the Telegraph titles last year when Lord Black was ousted as chief executive of Hollinger International, which runs the British papers as part of an international press group including the Jerusalem Post and Chicago Sun-Times.

The peer was named last week in a lawsuit issued by Hollinger International demanding the return of £118m in alleged unauthorised payments.