lucia's: The Sun also rises on Sunday: Murdoch visits the newsroom to quell rebellion

Suspension of arrested journalists lifted as News International boss tells staff paper will replace News of the World 'very soon'

Almost exactly 26 years ago, Rupert Murdoch prompted one of the most protracted and bitterly fought industrial disputes in Britain after he moved his newspapers overnight from Fleet Street to Wapping in east London, jettisoning the print unions along the way.

On Friday, Murdoch returned to Wapping to deal with the biggest crisis at News International since 1986, attempting to quell a rebellion by staff angry at the recent arrest and bailing of current and former Sun journalists by promising to launch a Sun on Sunday to replace the News of the World "very soon".

He also lifted the suspension of the 10 arrested journalists, inviting them to return to work "until or whether charged". "Everyone is innocent unless proven otherwise," Murdoch declared. The announcement immediately lifted flagging staff morale.

However, in the same email to Wapping staff, Murdoch stressed that the independent unit investigating alleged criminal activity by News International journalists will continue to "turn over every piece of evidence" it finds to the Metropolitan police. "Not just because we are obligated to but because it is the right thing to do," he added.

The management and standards committee (MSC), which reports to New York-based executives at News International's US parent company, News Corporation, has become the focus of journalists' anger after passing information about potentially illegal payments to police and other public officials, in the process revealing confidential sources.

While seeking to soothe frayed nerves, Murdoch also delivered a clear message that News Corp "will obey the law". "Illegal activities simply cannot and will not be tolerated ? at any of our publications," he said, which will do little to allay the fears of journalists on News International's Sun, Times and Sunday Times that there could be more arrests to come.

Andrew Neil, the former Sunday Times editor, described Murdoch's carefully worded statement as "clever", saying it had achieved the short-term objective of "holding off an incipient rebellion at the Sun".

However, Neil said that it was in essence a holding operation, adding that Murdoch's long-term chances of appeasing both Sun journalists and the big News Corporation shareholders in the US were slim.

"He has offered this promise on reinstating the journalists and the promise of a new paper, but the [MSC] continues to hand over the information on the journalists, which means Rupert Murdoch keeps his corporate lawyers in New York happy. And these are the people he is most concerned about," Neil told the Guardian.

"Essentially he is between a rock and a hard place and he is playing for time. This will last until the next 12 arrests of Sun journalists or until he is forced to come down on one side. And I am confident that the side he will come down on will be News Corporation in America. That is a multibillion-dollar business and News International is just a multimillion-dollar business."

After flying into Luton from the US on his private jet late on Thursday, Murdoch spent more than seven hours at Wapping as he sought to steady the ship. This came after a week of unprecedented public criticism by News International journalists about their treatment by his company, which even spilled over into the pages of the Sun and Times.

Murdoch and his eldest son, Lachlan, spent two hours in the afternoon touring the Sun newsroom, chatting to editorial staff as part of a concerted drive to seize back the initiative and raise spirits. There were also meetings with News International's chief executive, Tom Mockridge, and other senior managers.

In his lunchtime email to staff, Murdoch said the Sun "is part of me" and promised to "build on the Sun's proud heritage by launching the Sun on Sunday very soon". The New York resident also revealed that he will be staying in London, where he has a property in Mayfair, "for the next several weeks to give you my unwavering support".

This led to industry speculation that Murdoch was taking personal control of the crisis, and overseeing the launch of the Sun on Sunday. Media buying agencies, which book space in newspapers on behalf of advertisers, believe this could happen within weeks.

The initial reaction from Sun staff was one of relief and renewed optimism after the most difficult few weeks any of them can remember. "He spoke to a lot of people in threes and fours. There was no hostility. The atmosphere is buzzing again," said one insider.

Another News International journalist told the Guardian: "This is a proper fightback. Even if there are other arrests, this is a 'fuck you, here we are, we are carrying on despite everything'."

However, after the initial excitement of Murdoch's Sun on Sunday announcement had dissipated, other Wapping insiders offered more sober analysis of the day's events. "This changes nothing," said one senior journalist who would only talk on condition of anonymity. "There is a huge amount of concern across all three titles about protection of sources."

News Corp is also still facing the possibility of legal challenge to the MSC from News International journalists. Wapping insiders have approached the National Union of Journalists about the challenge and the union is talking to two leading QCs, John Hendy and Geoffrey Robertson, about the possibility of a group legal action.

Lisa O'Carroll

Josh Halliday

Ben Dowell