In deleting subs, CityAM is in good company: a 'paper in Peterborough or somewhere'

'Managers need to take care of stressed staff, especially now," proclaimed an article in CityAM, the London freesheet, last week. Just days earlier, the company's management had served notice on all of its sub-editing workforce, its web editor, a reporter and two members of the sales team.

Hardly the stuff to boost morale but a necessary move in the current climate, Jens Torpe, the paper's co-founder, said on Wednesday. "I don't understand why people are so surprised," he says in a rather exasperated way. "A number of newspapers in the UK have been doing without subs for a long while."

Unfortunately, he scratches around to name any, save for a "paper in Peterborough or somewhere".

He rebuts the suggestion that the move, coming after nearly three years of a subbed and generally well-regarded CityAM, has been forced on the company because of a lack of cash in the credit crunch.

"I don't know how many hundreds of people have been made redundant at the Telegraph, but nobody says they are going under. It's absolutely ridiculous. When we launched, we gave the editor the authority to build his editorial staff. He did it, and within budget, in a very short space of time.

"In the last couple of months, we've looked at potential ways to make the company more efficient, and feedback from editorial was that we should put more resources into front-line writing journalists," he adds. "There is a limit to the resources we have. That was how the new model came about. We have done three days under the new regime now, so it can be done. I have every confidence and trust in our journalists."

Co-founder Lawson Mun-caster is rather brusquer: "The sub-editing function is obsolete. I believe writers can take responsibility for filing copy that is readable and correct with a headline."

Insiders at the group seem rather less eager to embrace the new approach. One says: "The editorial staff are appalled about what has happened and how it has been done. Morale is low and there is a sense that any semblance of editorial standards has been completely undermined. The question isn't whether it's possible to produce a daily newspaper with no subs – of course that's possible. The question is what sort of newspaper will that be? Inevitably it will be of poor quality, with little original copy."

Another source says: "We were always aware we were a freesheet and we didn't have the luxuries that make producing a quality product easier, but there was a pride among the staff that we were taking on the national papers and doing things in a different way. That pride has disappeared now. I think people now feel embarrassed to work at a newspaper that has done so much to undermine journalism."

The chances of getting the journalists onside haven't been helped by the refusal of the founders to recognise the paper's union voluntarily. A letter from National Union of Journalists officials seen by The Independent on Sunday shows that the matter is now in the hands of the Central Arbitration Committee, the statutory body for union recognition, after "the union was given the runaround by the [CityAM] owners".

Signs that the new model might be creaking have already emerged. On Friday, readers of the paper's website were greeted by the news that "Andy Murray roars into last eight", two days after playing in the last eight and being dumped out of Wimbledon by Rafael Nadal.

Tim Luckhurst, professor of Journalism at the University of Kent, dismisses the idea that the paper can run successfully shorn of its subs and others. "One of the things that made CityAM special among the freesheets was that it invested in journalism," he says. "Journalists had the time and back-up to go out and source material. The moves outlined by the group last week are a huge mistake; it will result in the paper losing the cachet that once made it stand out."

He adds: "It's a tragedy and perhaps has more to do with the company's owners trying to break even, rather than some new paradigm. If the paper becomes a cheapo version of its former self then it will lose its allure very rapidly."

Torpe dismisses suggestions that the paper is set to go downmarket and miss out on scoops such as the paper's recent story on Shire relocating from the UK, which was picked up by bigger rivals across the board.

"Scoops remain very important for all newspapers but they are, of course, hard to come by," says Torpe. "More stories are now evolving in the evening from the nationals, where their earlier copy deadlines dictate the timing. With our later print run, we can elaborate more easily. Take the Bear Stearns situation in New York: the closest that British nationals came was to say they were selling their headquarters – we came out saying they would be selling everything that next morning, because we were able to work through the evening."

Readership has risen steadily since the paper's launch in 2006. Its latest audited circulation is a touch over 100,000 – a decent showing given that the Financial Times boasts a circulation across the whole of the UK and Ireland of just short of 140,000.

Profit figures for the company are harder to come by. The latest set of accounts filed at Companies House relate to the 12 months to the end of 2006, when shareholder funds came in at a loss of £4.8m – hardly reflective of the current position, which is likely to be much improved. The accounts relating to 2007 are due to be filed in the autumn.

"We don't come out of a big organisation. We need to be prudent financially. So we cannot afford to have inefficiencies," says Torpe. "Sometimes you have to restructure the organisation to take costs out to use them in areas that will benefit readers and advertisers. Our sales in the second quarter were up 36 per cent from last year – another sign from the advertisers' side of our improved standing."

Alongside Torpe and Muncas-ter, the paper is backed by a number of foreign nationals, including Leonid Rozhetskin, the multi-millionaire, Russian-born businessman thought to have been killed in Latvia earlier this year. It is not known how much Rozhetskin had ploughed into the company before his disappearance.

One source said: "It must be a blow for CityAM because Rozhetskin was always there as an emergency funding backstop. Now he isn't."

Torpe declines to comment on the company's backers but is willing to rebut the assertion that it needs new funding: "If anyone is looking to get additional finance, they haven't spoken to us about it. I know there are a number of different companies that would love to take CityAM over. But we are not talking to anyone because we aren't interested in selling in any way."

He adds: "Metro International took around five years to break even; we have come to that point much quicker."

In the next few months we'll find out if adherence to financial targets has come at a price.