When Andrew Neil took a leave of absence from GB News a fortnight after its 13 June launch, the rightwing news channel and its star presenter spent weeks insisting he was taking a long break to “recharge [his] batteries”.

The reality, sources have told the Guardian, is that rather than merely being on holiday Neil was locked in an increasingly fierce legal battle with the channel’s bosses from mid-July, with the station in turmoil as their lead presenter attempted to renegotiate and then exit a four-year contract believed to worth about £700,000 a year.

The chief executive, Angelos Frangopoulos, was overheard at the station’s west London headquarters over the summer cursing Neil’s name and pledging to sue the presenter for millions of pounds over alleged breach of contract.

At the same time, Neil is said to have claimed his reputation had been damaged due to being involved in a botched launch over which he had limited control. The presenter ultimately agreed to walk away without any money in order to get out of the channel, it is understood.

“More and more differences emerged between myself and the other senior managers and the board of GB News,” Neil told the BBC’s Question Time on Thursday night in his first public comments on the situation. “Rather than these differences narrowing, they got wider and wider and I felt it was best that if that’s the route they wanted to take then that’s up to them, it’s their money.”

Now, with Rupert Murdoch having signed up Piers Morgan to launch a rival channel, talkTV, staff at GB News are blaming the catastrophic legal battle between Neil and Frangopoulos for distracting from efforts to save the station over the summer. Many fear their station will be swiftly outgunned by a more professional Murdoch product, which at least in part seems to have been launched to exploit GB News’s failures.

The problem for GB News presenters is they may struggle to find jobs elsewhere with similar salaries, with some paid as much as £200,000 a year.

Simon McCoy, who left the BBC to present the GB News breakfast programme, has been overheard multiple times by colleagues openly despairing at his position and mocking the low ratings for his slots co-hosting with Kirsty Gallacher.

Some GB News producers have already made enquiries to see if talkTV will hire them, while dark jokes and gallows humour about the working environment were recently made real when an overworked staff member collapsed in the office.

There is a growing expectation that some of GB News’s current presenters could face the chop, with Frangopoulos interested in putting rightwing YouTubers on air instead, staff at the station believe. A last-ditch big-budget attempt to sign up Morgan as Neil’s replacement failed in August, while Morgan was in negotiations with News UK. Former Sky News presenter Colin Brazier will fill Neil’s prime time 8pm slot.

The channel has instead increasingly turned to prominent Brexit supporters for its hires, with ex-Ukip MEP Patrick O’Flynn suggested as a possible appointment to run its news operation. He did not reply to a request for comment.

While Neil ultimately agreed to remain as a twice-a-week pundit as part of his exit package, this is a temporary measure for the next few months and was designed to limit the public relations damage caused by his departure.

The Guardian has learned Neil began using the services of an employment lawyer in mid-July, less than a month after he launched the channel as lead presenter and chairman of the board. Staff said one issue is that the station never enacted a plan to let him present his show from home studios at his bases in the south of France and New York.

Frangopoulos has now become the undisputed boss at GB News following the departure of experienced programming chief John McAndrew, pushing the channel to the right with Nigel Farage as the flagship presenter. He also retains the backing of the company’s investors, who are perceived to be involved for ideological reasons as much as for financial return. Paul Marshall, the Brexit-backing hedge fund boss whose son used to perform in Mumford & Sons, is a major investor and has told employees he will temporarily replace Neil as chairman of the company’s board.

Viewing figures, emailed around the GB News office every morning, are a constant source of despair, although Farage is performing relatively well in the evenings and the channel continues to push its online offering. However, staff morale remains low, with Frangopolous said to be increasingly bothered by leaks to the press.

“The rightwing Fox News channel [approach] isn’t working and won’t work, [some] presenters are stupid and badly informed, and it wasn’t the right strategy for the channel,” said one individual with knowledge of the channel’s workings.

GB News and Andrew Neil did not respond to a request for comment.