Rupert Murdoch's News Corporation has withdrawn its bid to take full control of BSkyB (Image: Anthony Bolante, Reuters)

News Corporation announced on Wednesday that it would be withdrawing its proposal to take full control of BSkyB, bowing to public and political pressure precipitated by the scandal embroiling its British publishing subsidiary.

News Corp said in a statement that it "no longer intends to make an offer for the entire issued and to be issued share capital of British Sky Broadcasting Group PLC not already owned by it".

The announcement came just a few hours before British MPs were due to debate a Labour-proposed motion calling for Rupert Murdoch and News Corporation to pull out of their efforts to acquire BSkyB.

The motion would have passed the House of Commons with the support of all three major parties, after Downing Street announced that it would give its backing. Although non-binding, the motion would have represented a major embarrassment for the Murdoch media empire.

"We believed that the proposed acquisition of BSkyB by News Corporation would benefit both companies but it has become clear that it is too difficult to progress in this climate," said Chase Carey, News Corporation's chief operating officer and deputy chairman.

"News Corporation remains a committed long-term shareholder in BSkyB. We are proud of the success it has achieved and our contribution to it."

The withdrawal is a major setback for News Corp, which has spent the past year navigating through regulatory processes in Britain and Europe. While the conglomerate could hypothetically return to the table at some point, the likelihood of a new takeover proposal in the foreseeable future is practically non-existent.

Moreover, the communications regulator Ofcom is still in a position to rule on whether News Corporation meets the "fit and proper" ownership test for a broadcasting licence. An adverse ruling could potentially force News Corp to jettison its existing 39 per cent stake in BSkyB.

'The people told Mr Murdoch: this far, and no further'

Earlier in the day, David Cameron had used his prime ministerial statement on the phone-hacking scandal to declare that News Corp "should not be focused on mergers and takeovers, but on clearing up the mess and getting their house in order". In response to News Corp's announcement, Downing Street said that "we welcome the news" and reiterated Cameron's earlier remarks to the Parliament.

The Labour leader Ed Miliband, who has seized the political initiative in the past week, said that the withdrawal of the bid was a watershed moment.

"This is a victory for people up and down this country who have been appalled by the revelations of the phone hacking scandal and the failure of News International to take responsibility," he said.

"People thought it was beyond belief that Mr Murdoch could continue with his takeover after these revelations. It is these people who won this victory. They told Mr Murdoch: this far, and no further."

The shadow culture secretary Ivan Lewis told the BBC that the abandonment of the takeover proposal was "a victory for the public of this country, it's a victory for parliament and it's a victory for the tremendous leadership that Ed Miliband has shown".

The deputy prime minister Nick Clegg said that the decision was "the decent and sensible thing to do".

A week is a long time in business

News Corporation's dramatic and humiliating climbdown follows an extraordinary week of developments in the scandal concerning allegations of criminality at the News of the World and other News International newspapers.

A little over a week ago, final government approval for the BSkyB takeover seemed inevitable. The culture secretary Jeremy Hunt had announced a series of undertakings given by News Corp that were designed to protect media plurality in Britain, and most observers expected Hunt to give the conglomerate the green light within a month.

But that air of inevitability quickly dissipated as a string of damaging allegations about criminal behaviour at News International emerged throughout the week, beginning with the report that News of the World journalists had hacked into the phone of the murdered schoolgirl Milly Dowler.

In the days prior to Wednesday's announcement, investors had wiped around one-fifth from BSkyB's share value. Immediately after News Corp announced the abandonment of the takeover, the company's share price fell to as low as 663.5p before soaring to just under 700p at around 4:15pm BST.

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