Mutiny at the Wharf

"Mutinous resentment" is how one senior Daily Telegraph journalist describes the mood inside the newspaper group's London Docklands headquarters, where staff are on the verge of historic strike action. Until very recently, the very notion of downing tools would have been anathema to many at a company where even the National Union of Journalists father of chapel is a card-carrying member of the Conservative Party. But the future of the group is clouded by uncertainty as bidder after rival bidder jockeys for position to take control if Lord Black's deal with the Barclay brothers fails.

Within the building, senior journalists are being driven apart by past allegiances that separate them into rival camps aligned to different bidders. One Telegraph journalist says: "There are armed camps forming. The news guys are forming up around Martin Newland (the Daily Telegraph editor appointed last year by Conrad Black). Others are getting together with Kim Fletcher [the editorial director]."

The Daily Telegraph, meanwhile, has tumbled to a circulation of less than 915,000 for the first time in 60 years. "The paper is a mess," says a source at Canary Wharf. "Newland is popular, but there is beginning to be a whisper about all the fluffy stories and celebrity stuff that is getting big licks."

Plans to launch a compact edition have stalled, with nobody at the group being convinced of their futures. "The truth is that nobody knows what is going on," says another writer. "Management are sending e-mails paying tribute to the loyalty of the staff of a kind many have not seen in years. But the main message seems to be, 'Don't panic and above all don't talk to the press!'"

The group's union members, a sizeable minority of the staff, emerged from the meeting room on the 11th floor of the Canary Wharf tower on Thursday with an 82.8 per cent vote in favour of strike action over pay, if management fail to meet a deadline for an 8 per cent pay rise within two weeks.

The problems started, Telegraph sources say, when the management ditched the staff canteen two years ago, sending sub-editors out into Canary Wharf late at night in search of hot food. "They told us that we are a newspaper company, not a catering company," remembers one. A round of compulsory redundancies followed, accompanied by calls to tighten belts for the sake of the company.

In spite of this, the group has continued to operate very profitably up to and throughout the current crisis, with the proud boast: "Read a best-seller every day." But the once-genteel working atmosphere of the Telegraph has gone. "People have had enough," said one of those present last Thursday. "This place had a reputation for niceness, and they traded on that. They said, 'The Daily Mail will pay you more, but we are nicer.' But now the goodwill has evaporated."

It is 30 days since news broke of the Barclays' deal, and three months since allegations about unauthorised payments engulfed Lord Black and sent the Telegraph into turmoil. That could end next week if the Barclays' deal goes through, but if the takeover is blocked, the Telegraph will remain in a legal limbo for the foreseeable future. The crucial decision will probably be taken in a court in Delaware this week.

At The Daily Telegraph, there is an element that regards the Barclays as white knights riding to the rescue of their beleaguered institution. One member of the Barclay faction among the Telegraph's top team says: "The best thing that could happen would be for the newspapers to go to private bidders like the Barclays. They are in pole position to end the controversy that is damaging the titles and restore morale among staff."

But another clique feel that the arrival of the Barclays could potentially be disastrous and is keen to see Associated Newspapers, the owners of the Daily Mail, beat the reclusive brothers to the prize. One reporter says: "For some of the top editorial people it's all about Andrew Neil [the editor in chief of the Scotsman titles, also owned by the Barclays]. People such as Sarah Sands [the Telegraph deputy editor] and Kim Fletcher are pretty certain they would be dead if he came. People are relatively relaxed about the Barclays themselves. The problem is who they ask to manage the papers."

Neil has his supporters too, particularly among those who have worked with him before. "Love him or loathe him, he has a fantastic record as an editor, although he has never quite translated that into being a manager," says one. And, as another Telegraph journalist put it: "There are others who fear Paul Dacre [the editor in chief of the Daily Mail and Mail on Sunday] as much as some appear to fear Neil."

Worries about the Mail are particularly acute in the circulation, advertising and distribution departments, where there are fears that a successful bid by the Mail group would see their jobs swallowed up by their opposite numbers at Associated.

Both the Barclays and the Associated group are well aware of staff concerns. The Barclays have made it clear that Neil has not been involved in negotiations to purchase the Telegraph. At the same time, a Telegraph source says: "Associated are saying Paul Dacre will not be involved if they win. It's almost becoming a game of 'guess who isn't coming to dinner'."

The most dreaded of all the potential purchasers remains Richard Desmond, the owner of the Daily Express and Daily Star titles. Last week, in addition to making a formal bid for the Telegraph titles, Desmond submitted a claim to purchase the Telegraph's share in the Westferry printing plant he co-owns with the Telegraph parent company Hollinger International. A joint-venture formula agreed in 1987 decrees that if ownership changes at either the Express or the Telegraph, the other partner has a right to buy their interest in Westferry.

There has been some speculation that Desmond's rights over Westferry may give him an advantage over other bidders because the Telegraph titles are printed there. Senior Telegraph insiders say that is wrong. They explain that the joint-venture agreement would require Desmond to pay an inflated price for Hollinger's share of Westferry. One claims that the rumour is just "bluster" and calls it "an attempt to make it look like he has a chance of buying the Telegraph, when the truth is that he has not".

The picture is further muddled by the Sunday Telegraph editor Dominic Lawson and the former daily editor Charles Moore both being linked with alternative bids. One Sunday journalist says that colleagues had at first expected their editor to be fired by a new owner: "He's been there for so long and the paper is losing readers. It would be the perfect opportunity."

But it is a sign of the current confusion that Lawson's apparent proximity to the Barclays has led to him becoming flavour of the month. Another source says: "Lawson's wife, Rosa Monckton, is on friendly terms with both David Barclay and his son, Aidan. Having been a bête noire for years, Dominic is now surprisingly popular."