By John Bingham, and Jonathan Wynne-Jones
It marks a meteoric rise for the former oil executive who has been a bishop for only a year, but insiders described Welby as "the outstanding candidate".
Last night a spokesman refused to confirm his appointment. But it came a few hours after he pulled out at short notice from a planned appearance on the BBC Radio 4 discussion programme Any Questions due to take place in County Durham on Friday. He also cut short a retreat with diocesan staff and returned to the capital where it is understood his wife is travelling down to join him tomorrow.
Earlier this week bookmakers stopped taking money on Bishop Welby after a flurry of bets on him being chosen.
Sources in Canterbury earlier attempted to play down the expectation, with one even suggesting that they had been “surprised” that it was not him.
Although one of the front-runners since the beginning of the process there had been doubts over whether Bishop Welby had been a bishop for long enough. He took over at Durham just a year ago having previously been Dean of Liverpool.
There were also questions over whether an Eton-educated Archbishop would be well received in some quarters.
It is thought that the questions played a part in delaying the final decision although it is also thought his family were reluctant to be drawn into the limelight.
Dr John Sentamu The Archbishop of York, was the early favourite for the post and and the Bishops of Coventry, Norwich and Liverpool were also widely tipped.
But the choice of the 56-year-old to lead the world's 77 million Anglicans marks a decisive break with the past for the Church.
While his predecessors have drawn on long and distinguished careers as academics or clerics, his experience is of the world of mammon as much as God.
A former oil executive he gave up a highly paid career after feeling a “call” to the priesthood in the late 1980s.
“Something in me just said ‘this is what you should be doing’,” he recently explained.
He was able to draw on years of experience in oil exploration in troubled areas of west Africa, when his ministry led him to work in conflict resolution in the violent Niger Delta, where he narrowly avoided being shot dead.
At a time when the Church is grappling with the aftermath of the banking crisis, he combines - almost uniquely – an understanding of the working of the City with that of life in the inner city, gleaned as a parish priest and Dean of Liverpool.
He has used his seat in the Lords as a platform to challenge the “sins” of the multi-billion pound banks as much as the small-scale pay-day “loan sharks" he has seen at work on the North East - condemning the practice in the language of the Old Testament as “usury”.
Although Educated at Eton and Cambridge and even a member of a Pall Mall club, he is seen as far from an establishment figure.
Theologically, he is unashamedly part of the evangelical tradition, upholding a more traditional and conservative interpretation of the Bible than some in the Church of England.
But he is also a strong advocate of more modern styles of worship.
Dr Williams is also due back in London tomorrow after almost two weeks abroad, visiting Papua New Guinea before attending a meeting of world Anglican leaders in New Zealand.
Speaking in Auckland yesterday, at what aides said would be his final press conference, he was asked for advice for his successor.
Quoting the theologian Karl Barth, he said that the new Archbishop should preach “with a Bible in one hand and a newspaper in the other”.
He said that it was vital that whoever is named must be able to make his message relevant to modern life and “like” reading newspapers.
"You have to be cross-referencing all the time and saying, 'How does the vision of humanity and community in the Bible map onto these issues of poverty, privation, violence and conflict?'
“And you have to use what you read in the newspaper to prompt and direct the questions that you put to the Bible: 'Where is this going to help me?'
“So I think somebody who likes reading the Bible and likes reading newspapers would be a good start."