The FTSE 100 company said chairman Roberto Quarta would becomes executive chairman until the appointment of a new CEO.

Mark Read, chief executive officer of Wunderman and WPP Digital, and Andrew Scott, WPP’s corporate development director and chief operating officer for Europe, had been appointed as joint chief operating officers of WPP.

Sorrell would be available to assist with the transition, the WPP board confirmed.

It said the previously-announced investigation into an allegation of misconduct against Sorrell had now concluded, adding that the allegation did not involve amounts that it considered “material”.

In accordance with his at-will employment agreement, Sorrell would be treated as having retired on leaving WPP, as detailed in the directors' compensation policy.

His share awards would be pro-rated in line with the plan rules, and would vest over the next five years to the extent group performance targets are achieved.

“Sir Martin has been the driving force behind the expansion of WPP to create the global leader in marketing services,” said chairman Roberto Quarta.

“During this time, the company has been successful because it has valued and nurtured outstanding talent at every level - within and well beyond our leadership teams.

“On behalf of the board I would like to recognise these achievements and thank Sir Martin for his commitment to the business over more than three decades.”

Sorrell himself said he was “sad” to leave WPP after 33 years. “It has been a passion, focus and source of energy for so long. However, I believe it is in the best interests of the business if I step down now.”

Sorrell said he was leaving the company in “very good hands”, with Read and Scott and the management team having the knowledge and abilities to take WPP to “even greater heights”, capitalising on geographic and functional opportunities.

“I will particularly miss the daily interactions with everyone across the world and want to thank them and their families for all they have done, and will do, for WPP.”

Analysts at Citi were quick to jump on the news on Monday morning, noting that over the last year, WPP had been seen by many to be “losing its way”.

Citi’s Thomas Singlehurst said that against a backdrop of an improving macro environment, organic growth had been slowing.

“In practice this slowdown has been happening for years and has a multitude of explanatory factors. Anyone coming in to take over the CEO role at WPP will be entirely focused on turning this round.”

Singlehurst said the debate was now whether a new CEO would opt for a “quick fix” compared to the existing “slow fix”.

“The fact is that there is a lot of uncertainty ahead, [and] it is not clear whether the current margin targets or dividend payout will survive management change. But then again, valuation is so depressed, we think value will out,” Singlehurst explained, keeping the shares as a 'buy'.

Numis analysts said they expect the board to consider internal and external candidates and that Sorrell "will be hard to replace with one person".

"The succession has led to questions over the size and scope of WPP and we can see a change of management accelerating the current process of reducing overlap and increasing flexibility. Although we would not rule out a margin reset, we do not view WPP's margins as out of step with the industry given its functional and geographic split, in addition to a reporting structure which increases margins relative to peers both by reducing the numerator and increasing the denominator."

Numis said the market might accept dividend increases and buybacks being put into abeyance given WPP's already high payout ratio and leverage at the top end of its target debt corridor.

"Our base case is for a new management team to continue and refine the existing strategy, though we acknowledge that any group without a CEO is vulnerable to a bid approach in the interregnum."