Advertisers and backers go cool as Desmond counts cost of outburst

Richard Desmond is counting the political and business cost of his extraordinary racist outburst in which he referred to all Germans as Nazis and goosestepped around a business meeting with rival newspaper executives.

Richard Desmond is counting the political and business cost of his extraordinary racist outburst in which he referred to all Germans as Nazis and goosestepped around a business meeting with rival newspaper executives.

Reports of Mr Desmond's crude attempts to unsettle representatives from the Telegraph Group, who had met him on Thursday to discuss a jointly owned printing plant, brought condemnation yesterday from Labour and Conservative politicians.

Business figures also criticised Mr Desmond, with several threatening to withdraw advertising from his newspapers, which include the Daily Express and The Star. More lasting damage could result, however, from the reaction of Commerzbank, which bankrolled Mr Desmond's £125m takeover of The Daily Express in 2000; it is now thought likely to blacklist him.

Also on Thursday the Daily Express announced its intention to switch allegiance to the Tories, a move that is now proving highly embarrassing for the Conservative Party. Ian Taylor, the pro-European former Tory minister, condemned the tycoon's comments as "outrageous". He said: "The Tory party should withdraw support from the Daily Express. Desmond's behaviour indicates that the Express is not a newspaper which is respectable. Whichever political party it supports will be embarrassed."

Conservative Central Office was not officially commenting on the reports, describing them as part of a private dispute. A senior party source said: "The support of the Express is hugely symbolic and significant, but we should be cautious about taking money from Mr Desmond. We should keep him at arm's length. Michael Howard is wise enough and big enough to do that." A senior shadow minister added: "He is somebody worth drawing breath before you do anything particularly close with him."

The Tories' embarrassment was compounded when it emerged that the Express chief launched an expletive-laden attack on Mr Howard last May. At the end of a private lunch held on May 6, Mr Desmond told Mr Howard: "The problem with the fucking Tories is that you're fucking fucked." One person who attended the lunch said: "Howard was visibly shocked. He was not prepared and was not properly briefed. He tried to make light of it by saying that Desmond must have been a bit grumpy because Arsenal had lost the night before."

Labour also condemned Mr Desmond's actions, with Denis MacShane, the minister for Europe, issuing a statement through the British embassy in Berlin decrying the Express owner's declaration that Germans were "all Nazis", made in reference to the publishing company Axel Springer, which is poised to buy the Telegraph titles. "Mr Desmond's comments should be dismissed with the contempt they deserve. This kind of racism against Germans is utterly repugnant to decent British people," Mr MacShane said. Labour ran into a storm of protest within the party in 2002 after it emerged that Mr Desmond had given it £100,000.

Mr Desmond still owes Commerzbank a small amount of the money he borrowed to buy The Express. The German lender was also partly backing his £500m bid for the Telegraph newspapers. While Mr Desmond has pulled out of that race, severing his ties with Commerzbank could be damaging for his future plans, which include setting up a London evening paper to rival The Evening Standard.

Commerzbank would not comment, but one person close to the bank said: "Especially the younger bankers were terribly, terribly upset and asked how someone could say something like that." Sources said that future projects with Mr Desmond would have to be passed through Commerbank's credit committee in Germany, which would probably be hostile doing any further business with him.

HBOS, which owns Halifax and Bank of Scotland, could also come under pressure because it is thought to have been another party offering financing for Mr Desmond's bid for the Telegraph. The group was criticised last month after it financed the sale of some of Mr Desmond's pornography titles - including Asian Babes and The Big Ones - to Remnant Media.

Companies who advertise in Mr Desmond's papers said they would be reviewing their policy. Mannny Fontenla-Novoa, the chief executive of Thomas Cook UK, said: "We are very much against racism and Mr Desmond's comments may well lead us to review our advertising relationship."

Peter Rothwell, chief executive of Tui Northern Europe, which owns Thomson Travel, said: "The guy will have his cross to bear from the actions he takes. Clearly the guy is getting his just deserts because the media are making mincemeat of him, quite rightly. We certainly won't be increasing our advertising."

Ofcom, the media regulator, is also likely to take a dim view of Mr Desmond's outburst if he tries to buy more newspapers.

On Thursday night, for the first time in weeks, Mr Desmond did not come down to the editorial floor to oversee the production of the first edition. One source said: "Just as it seemed possible that we might be taken more seriously he comes out with this. You have to ask what's going right for him. We have lost an editor and all the bombast about a new London paper appears to have come to nothing."

WHAT HIS ADVERTISERS THINK

The reactions of four of Express newspapers' German-owned advertisers

Manny Fontenla-Novoa, chief executive Thomas Cook UK

"We are very much against racism and Mr Desmond's comments may well lead us to review our advertising relationship with the Express."

Peter Rothwell, chief executive Tui Northern Europe, owner of Thomson Travel

"I'm not sure it's worth making this into more than just the ridiculous actions of someone who has lost the plot. Clearly the guy is getting his just desserts [in the media], quite rightly. It doesn't help. We certainly won't be increasing our advertising in the Express."

BMW

"If he starts to make a habit of saying these kind of things then we might have to review the situation."

Mercedes-Benz

"Mr Desmond's reported remarks are unfortunate but we cannot see that anything constructive will come from adding to the debate. I don't think we will be changing our advertising plans."