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The closure of D'Arcy and its integration into other Publicis-owned networks has also placed a question mark over key advertising accounts for clients such as Procter & Gamble, Fiat, Tetley Tea and McCain's Foods.

D'Arcy handles some £25m of COI business and is effectively Whitehall's largest agency. Acting COI chief executive Peter Buchanan said: "We are very concerned regarding any restructuring and are talking to all our clients. We hope that as part of any restructure, key people working on government business are retained and can flourish in the new environment."

Publicis Groupe's chairman and chief executive Maurice Levy confirmed yesterday (Tuesday) that following the group's merger with Bcom3, it would integrate D'Arcy within other units of its group.

Levy said the aim was to strengthen its three global networks: Publicis, Saatchi & Saatchi and Leo Burnett. The future of the D'Arcy business had been widely questioned after it lost key global accounts such as Mars and Pampers.

In the US, D'Arcy will be integrated into Publicis USA, with some accounts and teams moving to Saatchi & Saatchi. Fallon, the other Publicis-owned agency, is not expected to be affected.

Outside of the US, Publicis said each country's situation would be reviewed separately with the overall objective of strengthening client offerings and service worldwide.

D'Arcy UK refused to comment on the situation. However, observers speculated that in the UK, the most likely outcome is for D'Arcy to effectively merge with Leo Burnett.

There are too many major client conflicts for it to merge with Publicis' UK agency and it is widely expected Leo Burnett will pick up Fiat, one of D'Arcy's key clients. Leo Burnett already handles the Fiat business in several European countries but lacks a UK car account. Peter Newton, PR director at Fiat UK, would only say that "as far as we are concerned it is business as usual".

Procter & Gamble, for which D'Arcy handles brands including Fairy, Charmin toilet tissue, Bounce conditioner and Always sanitary towels in the UK, is in discussions with Publicis. Both Leo Burnett and Saatchis are on P&G's roster.

D'Arcy's other key accounts include US credit card company Capital One, held globally. It is not clear whether Leo Burnett could absorb this business in the UK, as it handles Morgan Stanley Dean Witter. The company refused to make any comment on the situation.

D'Arcy's long standing UK accounts include Tetley Tea, which it successfully retained after a pitch earlier this year. Marketing director Nigel Holland said he understood Publicis had assured clients that it aimed to keep the same teams working on the same accounts.