Mervyn King, who runs the Bank of England, this week finally spotted that Britain is falling into what is expected to be a long, deep recession. If he had worked in ad sales at The Scotsman, or one of Johnston Press’s other titles, he would have detected a near 30 per cent decline in advertising two months ago.

The Lehman collapse has worsened the outlook for already fragile media businesses to such an extent that a nightmare scenario is looming. If manageable debt problems become increasingly challenging, it is possible, just possible, that something more dramatic will occur – when takeovers or even closures become the only way out.

This week, underlining the point, Johnston Press, which has already raised £212 million to keep its banks happy, conceded that it may have to go cap in hand to the banks again in 2009.

No newspaper group will be immune from some pressure, although the debt-free owners Richard Desmond and Guardian Media Group have the least to worry about, financially speaking. Over the past fortnight, Fleet Street executives have been wondering openly about the future of The Independent, which will lose a little over £10 million this year – an unhelpful cash-drain on a parent company burdened with €1.4 billion (£1.2 billion) of debt.

With a 10 per cent fall in advertising, the Indy’s losses for this year are estimated to be about £5 million or £6 million more than would have been forecast only a few months ago. But even that is not as disturbing as the sudden decline in circulation of the title, with sales dropping 9 per cent to just over 200,000 in October.

For the Indy, and everybody else, it will get worse long before it gets better. Pointedly, City analysts this week competed to out-gloom each other. Morgan Stanley, for example, reckoned that advertising would be down 19 per cent in 2009 for national newspapers and down 24 per cent for local papers. That bleak prognosis will come true if high-spending retailers stop advertising. Sir Stuart Rose, Marks & Spencer’s executive chairman, led the way this month when he spoke of a 20 per cent cut in marketing as Britain’s leading purveyor of pants tightens its elastic.

In any normal industry, the solution would be some sort of consolidation. Newspapers, though, are different. That is partly for the very good reason that media plurality is vital in a healthy democracy and partly because owners are stubborn and rarely give up. Such bloody-mindedness is perfectly reasonable – even philanthropic – if the supporting business is strong enough to absorb the losses.

For The Independent, though, the problem is not the scale of losses (a newspaper losing money can be in fine company), but the balance sheet of the parent company. That also explains why Sir Anthony O’Reilly appears willing to give up his €300 million stake in successful Australian and New Zealand businesses, but wants to keep hold of The Independent – because a sale of the Indy might generate only £1, which would not buy half a pint in a pub.

The other problem with consolidation is the regulators, who take the notion of plurality, and after days of workshops and seminars (or whatever regulators do), turn it into a religion. The veneration is at its worst with regional newspapers, most of which are already regional monopolies. There, deals are scrutinised as if there were no other competing media, such as Yellow Pages, Google, ITV local websites and planned BBC websites. Consolidation is rarely tested among national newspaper owners, but there is no reason to think that overexcited regulators would adopt anything but a similarly one-eyed approach.

Yet mergers can be healthy. After all, if Lloyds TSB can buy HBOS for the nation, then to safeguard investment in regional newspapers it would make sense to allow the existing four main players to dwindle to three. That would have to be done probably through a break-up bid, with a Trinity Mirror-Johnston Press tie-up the most interesting starting point. With profit margins collapsing – Trinity has closed 28 titles so far this year – local newspapers have never looked more fragile.

Indeed, if regulators are doing their job properly, what should happen is that the BBC’s plans for ultra-local websites (to be decided upon by the Trust next week) should be dropped. The BBC should be trying to compete only with ITV’s regional news bulletins. Both broadcasters’ bulletins have long coexisted happily with the local paper that is delivered to the door.

Consolidation would also make sense for The Independent, for which a future in isolation threatens to be one of perennial cost-cuts in pursuit of a profit that may never come, at least in this economic climate. But the problem for the Indy is that it is not obvious that Britain needs five national quality newspapers, or that the title would be attractive to any other newspaper owner, who would have to grapple with its losses for some time to come. The recession cannot end quickly enough.

dan.sabbagh@thetimes.co.uk

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