The headquarters of pharmaceutical company GlaxoSmithKline in London. File picture: Ben Stansall, AFP

London - GlaxoSmithKline's long-serving boss Sir Andrew Witty has announced he is quitting the company, in a move that observers said was vital to stem a full-blown shareholder revolt.

The City grandee will retire in March next year amid criticism of GSK's performance from high-profile investors who believe the group would be more successful if it were split up. One shareholder said it seemed likely that chairman Sir Philip Hampton, who joined last year, would have suggested Sir Andrew named a date to leave before tensions with shareholders rose even higher.

Read: GlaxoSmithKline CEO Witty to bow out

The UK's biggest pharmaceutical company has appointed headhunters Egon Zehnder and Korn Ferry to begin the search for a successor to Sir Andrew, who has been chief executive since 2008 and earned more than £40m in that time.

There has been speculation over his position for the past three years as a downturn in sales and profits, concern over the drug pipeline and a corruption scandal in China have hit GSK.

When Sir Philip, a former chairman of Royal Bank of Scotland, took over the chairmanship of GSK last year, it was expected that replacing the company's leadership would be one of his priorities. The veteran fund manager Neil Woodford has criticised Sir Andrew for not spinning off parts of the group, and yesterday called for an external replacement.

A year ago, GSK considered selling off its HIV business, but the strategy was ultimately rejected. Woodford argues that the sum of its parts is greater than its whole. “In essence, Witty is running four FTSE 100 companies, and he's not doing a very good job in my view,” he said in November.

Och-Ziff Capital Management, the New York hedge fund, has built a 0.5 per cent stake in GSK and has been pressing for change at the top, also preferring an outside candidate.

Sir Andrew was knighted for services to the economy in 2012 and is a government adviser. Last month he was defiant in presenting the company's strategy, saying that sales of its new products had reached £2bn last year. He also argued that the “annuity”-style income from the vaccine and consumer healthcare businesses helped to make up for the volatile product cycle of developing new drugs.

Internal candidates for his role include GSK's pharmaceuticals head Abbas Hussain and Emma Walmsley, chief of the consumer healthcare division. David Epstein, head of the pharmaceuticals division at Swiss rival Novartis , is seen as a possible external candidate.

One top shareholder said yesterday: “This brings us yet more uncertainty. Will the new person cut the dividend and change the strategy again? Earnings may increase and make that unnecessary, but who knows?”