The end of the long-standing relationship between the agency and its client is a blow to Grey's efforts to create a better balance between local business and its giant international accounts, including Mars, Procter & Gamble and GlaxoSmithKline.
The loss of the business, one of Grey's biggest domestic accounts, also places a question-mark over the future of Grey Retail; Carpetright accounted for a significant part of the specialist unit's business.
Grey confirmed this week that it had parted company with Carpetright after failing to reach a more realistic remuneration agreement. No-one at Carpetright was available for comment.
Carpetright has traditionally been a highly labour-intensive account, which spends heavily in press but shies away from brand advertising. Its last attempt was in August 2002 when it went on TV with a campaign starring the former Arsenal and England footballer Ian Wright.
Carpetright, led by its chairman and chief executive, Phil Harris, sells carpet, vinyl and wood laminate floors from 364 outlets across Britain.
It reported an upsurge in sales of 4.6 per cent in the 13 weeks to 31 January, raising hopes the home-furnishing sector might be picking up.
But the company acknowledged that trading conditions would remain tough, with rising interest rates, cooling house-price inflation and high personal debts all having an impact.
Carpetright said its gross margins had been flat during the latter part of last year, suggesting that at least some of its sales growth had been driven by discounting.