A former director of the Press Complaints Commission has described as “deeply troubling” the collapse of the KM Group’s attempted takeover of rival Northcliffe-owned titles in Kent.

The proposed deal was aborted last week after the Office of Fair Trading decided to refer the move to a full Competition Commission inquiry.

Speaking in a House of Lords debate, Lord Guy Black said it was important that such deals were allowed to go through.

“It is vital that the UK regulatory regime recognises the realities of today’s highly competitive local media markets, allows greater flexibility over media mergers and acquisitions and does not continue to block small, family-owned newspaper publishers from developing and growing their businesses in the deeply troubling way that happened only this week in a proposed merger relating to the Kent Messenger Group and Northcliffe Media,” he told fellow peers.

The KM Group withdrew its bid to buy the seven Kent Regional News and Media titles after the OFT referral, saying it could not afford to take on the additional costs of the review.

Lord Black, who is now executive director of the Telegraph Media Group, also said that local newspapers in Northern Ireland faced “serious commercial question marks” over their viability in the wake of public sector cuts.

He said public sector jobs accounted for 70pc of recruitment revenues on some newspapers in the Province.

And he said there were “continuing concerns” about the threat to statutory public notices in newspapers, which Lord Black said were a key source of income.

However Lord Kilclooney, chairman of Irish publishing group Alpha Newspapers, disagreed with Lord Black’s claims that small newspapers in Ireland are in trouble.

“The weekly papers are succeeding; the daily papers are in decline right throughout the United Kingdom,” he said.