The future of the Department of Health's commercial directorate is in doubt following the resignation of its director general Channing Wheeler.

Mr Wheeler resigned for personal reasons. But his departure had been expected because his directorate had shrunk, with staff and responsibility moving to the regions and elsewhere in the DH. Sources said there was now "insufficient justification" for a director-general-level role.

As part of a deliberate policy to "embed" commercial expertise within the NHS, the contract management element of the directorate’s role had been absorbed into the finance, performance and operations directorate led by David Flory. At the same time, the thrust of recent initiatives to open primary care services to competition has come from Mark Britnell’s commissioning and system management directorate.

Commercial directorate staff have been gradually taking up positions at strategic health authorities in a bid to regionalise the directorate. That follows primary care trust complaints that the first batch of independent sector treatment centres were imposed by Whitehall and were often inappropriate for local circumstances.

The new SHA commercial leads are supposed to perform an advisory and support role for PCTs, but a source said there had been "no significant" take-up of their services.

"The perception in the NHS is that the commercial directorate has been quite a bullying organisation," another source said. "Chan has tried to make a difference but these things stick. Why would people invite an organisation they have been used to being bossed about by to come in and give them friendly advice?"

The Office of Government Commerce has undertaken a review of the commercial capabilities at the DH, which is due to be published in August. A department source said the review found a broader need for commercial knowledge within the DH, but it was not clear if that would mean a discrete commercial directorate would continue to exist.

NHS Confederation Partners Network director David Worskett said the real concern now was what happened at SHA level. "The policy to shift responsibility and capacity to SHAs is good but we need to make sure they are able to properly implement the principles of competition and collaboration," he said.

Mr Wheeler plans to leave in July, 11 months after he arrived at the DH. HSJ learned last Wednesday that he was leaving but a department spokesperson denied it, saying: "It’s an absolute load of rubbish. He's not resigning at all." The DH confirmed his departure in a statement issued at 7pm on Friday.

In it, NHS chief executive David Nicholson said: "We are sorry to see Chan go, he has done a fantastic job.

"He has set a high standard, and we remain committed to having strong commercial expertise and presence in [our] leadership team. We are now going to review all our commercial capacity across the DH to identify how we can strengthen it, going forward."