Journalists hit out at 'betrayal' as Murdoch closes News of the World

Rupert Murdoch closed the 168-year-old News of the World last night in a desperate attempt to limit the ongoing scandal over phone-hacking, as the paper's former editor, Andy Coulson, prepared to be arrested.

The shock decision was revealed to staff at Mr Murdoch's News International newspaper in an email from his son James, the News Corp deputy chief operating officer, who said: "The News of the World is in the business of holding others to account. But it failed when it came to itself."

Journalists at the newspaper raged that they had been betrayed by Rebekah Brooks, the News International chief executive, who faces calls for her resignation, after revelations the NOTW under her editorship hacked the phone of murdered schoolgirl Milly Dowler.

The revelation came as Mr Coulson, David Cameron's former director of communications at Downing Street, was preparing to be questioned under caution over what he knew about phone-hacking under his editorship.

The decision to close the newspaper came after a long line of companies said they would no longer advertise in it.

Ford, Sainsbury's, Asda, O2, Boots, Specsavers, Dixons and npower pulled their ads, while The Royal British Legion cut its ties with the paper over allegations it hacked the phones of families of soldiers killed in Iraq.

The final paper will carry a large apology on its front page.

It is understood Ms Brooks discussed resigning with James Murdoch on Wednesday, but did not offer to do so.

Rumours were circulating last night that News Corp was planning to return to the Sunday tabloid market by launching the NOTW's sister paper, The Sun, as a Sunday newspaper, and that Mr Murdoch had seized an opportunity to be rid of what had become a damaging brand within his media stable, as well as making cost savings and improving efficiency.

Critics of News International's handling of the phone hacking inquiry, includingformer Deputy Prime Minister Lord Prescott and the Labour MP Tom Watson, were quick to dismiss the closure of the NOTW as a re-branding exercise which would not draw a line under the affair.

Some members of staff at The Sun, walked out in support of some 200 sacked workers last night.