Allen recently announced that she is retiring from music to focus on the vintage clothing business Lucy In Disguise.
However, The Mail On Sunday reports that she is rowing with Sarah Owen over how to publicise the business.
Meanwhile, a source claimed that the pair have had a volatile relationship since Owen revealed that Allen attempted suicide when she was a teenager.
"The friendship has gone through fits and starts but since Sarah spoke about Lily it has got even worse," the insider said.
"There have been other issues over how much press they do together and how high-profile they make the project. Lily wants to keep the project low-key rather than turn it into a big celebrity thing but Sarah seems to have other ideas. It's causing big problems."
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