'Financial Times' editor steps down as newspaper loses its way in the City

It demonstrated deep anxiety at the paper's owners, Pearson, about the FT's future direction and performance, analysts said. The official statement from Pearson said "strategic differences" between Mr Gowers and the company had led to him stepping down.

Could the change in editor, which follows a recent change in chairman at Pearson, start to open up the possibility that the newspaper may be sold? The title does not fit with the rest of the Pearson business, which is about publishing books.

The decision to replace Mr Gowers, after four years in the job, would almost certainly have been taken by Pearson's chief executive, Dame Marjorie Scardino. That breaks the company's record as an owner that does not interfere in editorial matters.

So what's the big problem? Mr Gowers and Pearson were being tight-lipped about those "strategic differences" yesterday. But the criticism that is levelled most often at the FT in City circles is that its UK coverage has suffered as the paper has focused on conquering the world. The FT's detractors also complain that business coverage comes second place to rather dense coverage of politics and public policy and that the FT's business voice has lost authority.

Some of this criticism will be unfair and the standard of journalism in the FT remains very high by common agreement. It certainly remains a serious read. But what is undeniable is that circulation in this country has plunged over the past five years, to less than 100,000 at full cover price, from more than 162,000 in September 2000. That is enough to seriously worry any owner, though Pearson is quick to point out that international sales have ballooned during the same period. The paper, which dates to 1884, made a loss of £32m in 2003, a £9m loss in 2004 but it should break even this year.

Many believe the tension between serving a UK and an international audience was a large contributory factor in Mr Gowers' departure. Mr Gowers says the "unique challenge" of the FT was this dual role. "It's like riding two horses at the same time," he says.

Lorna Tilbian, an analyst at Numis Securities, says: "[The newspaper has] moved away from a UK focus which has meant that the FT has allowed others to take some of their UK readers away."

For instance, yesterday's Lex column in the UK edition of the FT carried one item about a British company, out of the six pieces that were printed.

But there appears no obvious sign that the appointment of Lionel Barber as the new editor is meant to put a renewed emphasis on the UK. Mr Barber, 50, is a highly regarded journalist but his career has centred on reporting from abroad and covering non-business news. And Pearson sources say the company is as committed as ever to being a "truly international", perhaps even more so.

Hugo Dixon, a former editor of Lex who runs Breakingviews.com, which provides online financial commentary, says: "Lionel is an excellent choice as editor. He is one of the few people who has a fighting chance of turning the FT around. But even for him, it's a tough challenge."

The overwhelming problem for the FT is illustrated by the likes of Breakingviews.com. News and information has migrated to the internet. This issue confronts all newspapers but it is especially acute in the time-critical world of business. A trader at a hedge fund is not interested in reading what he needs to know right now in tomorrow's newspaper. The FT has sought to address this with the FT.com website, which may cannibalise some of the paper's readership, but at least it provides the paper with some revenues from online readers.

Pearson has invested in the FT, both in its international editions - it now sells about 430,000 a day, printed from 27 sites across the world - and very considerably in FT.com, into which it sunk £200m. But insiders complain that the splurge was rather unfocused and FT.com today has just 80,000 subscribers to show for it. In more recent years, when the financial losses hit, that investment dried up, at a point when it was badly needed.

Mr Gowers insists that the newspaper has been through the pain - a plunge in advertising that followed the bursting of the stock market bubble in 2000.

"I've steered the paper through the four worst years in its history. And it's still intact," Mr Gowers says.

He says the first three years of his reign were focused on international growth - the Asia edition was launched in 2003 - and it was this last year where he has been able to concentrate on the UK. He insists that the UK circulation has stabilised, and is even showing signs of growing. In September, the FT averaged 97,200 UK sales a day at full price, or 137,505 including discounted copies.

Mr Gowers says he has launched initiatives which make the FT a "more unmistakably business paper". He also points out that whoever runs the FT, is going to attract criticism. "Editing the FT is like living in a goldfish bowl. You're steward of a national institution, a part of life in this country."

As well as the relentless rise of the internet, another problem for the FT has been the expansion of business coverage in other newspapers, such as The Times and The Daily Telegraph. So for a business audience that wants UK news, the FT does not now necessarily offer a whole lot more than its domestic rivals.

The charge that the FT has lost authority in the business world is more vague and may well be a case of people harking back to some imaginary golden age - or put about by the paper's rivals. Some business people complain that it no longer seeks to be the paper of record for the sector - they don't like the more aggressive journalism it has carried in recent years. There is also unhappiness in some business quarters that the paper remained for too long in awe of New Labour.

One former FT journalist says a major problem for the paper is that the salaries it can offer are now so far below what its journalists can make in the City, that talented and experienced reporters leave in large numbers.

The FT's international expansion is impressive but this places it head-to-head with The Wall Street Journal and the International Herald Tribune, which is beefing up its business coverage. No newspaper has an easy existence any more. Those that seek to serve a business audience have an even greater challenge.