Guardian Media Group may shutter the Observer

Guardian Media Group (GMG) is mulling closing down the Observer - the world's oldest Sunday newspaper, in a radical cost-cutting drive after the Group posted an annual loss of £89.8 million for last year.

Having acquired the Observer in 1993, the world's first Sunday newspaper that published its first issue on 4 December 1791, GMG said that it was reviewing its three-year strategy after posting an annual pre-tax loss of £89.8 million last week amid a decline in advertisement revenues due to the recession.

After the Observer racked up an estimated £20 million loss for last year, members of the Scott Trust, a charitable body that owns GMG, had suggested replacing the Sunday newspaper with a magazine to be published with the same name.

In early July, members of the trust were shown trial copies of the magazine to be published on Thursday, which would replace the Sunday paper - a move that has not gone down well with the employees at the Observer.

The journalists and other staff working at the Observer feel that the paper is being made a scapegoat, as the GMG is heavily promoting the Guardian, online.

The GMB is also mulling other cost cutting measures including reducing the Observer's workforce. An earlier proposal for a pay cut was put off in lieu of employees taking two weeks holiday without pay.