Trinity Mirror and Johnston Press have both been caught up in frenzied City speculation over the past fortnight as fears for the future of the industry intensify.

Johnston's had to deny reports of a takeover bid from a Malasyian investor, while Trinity's share price plummeted 25pc on Monday after a profits warning.

But the two companies have refused to be drawn on comments by a leading City broker suggesting a merger could be the answer to their difficulties.

A Trinity Mirror spokesman said the company did not comment on "market speculation," while Johnston Press chief executive Tim Bowdler dismissed the rumours as "speculative gossip"

Earlier brokers ABN Amro had said: "These are desperate times, and they call for desperate measures: we believe a Trinity/Johnston combination makes sense.

"The geographical fit is no 'dream ticket', but Trinity has an urban bias, while Johnston has a rural bias, so geographically the fit is not bad.

It said a merger of the two would generate savings of up to £40m, or 5pc of their combined cost base.

ABN Amro said that, given the problems faced by the media sector, shareholders and management will increasingly press for industry consolidation.

However a recent House of Lords report called for tighter restrictions on newspaper mergers to ensure greater "diversity" of news provision.