The chief executive of one of the country's biggest trusts has stepped down from his job amid claims that he was made a scapegoat for an abandoned private finance initiative deal.

The retirement of 51-year-old Peter Reading, chief executive of University Hospitals of Leicester trust, was announced at 3pm last Thursday - effective from the following day.

But staff said he had been unexpectedly absent from the trust for two weeks and there were rumours he was about to leave.

Two months ago the trust decided not to go ahead with a£711m PFI deal which would have refurbished its older buildings.

By that time the trust had incurred costs of more than£23m, had already reduced the scope of the PFI to involve more refurbishment and less new build, and had seen building costs increase (for more background, click here).

Both the trust and Mr Reading said his decision to leave was 'mutual' and that it was the right time for a change.

'The PFI cancellation opened a new chapter for the trust. It is common sense to say you need a leader who will be around for five to seven years.

'I'm not sure that I would be around for that time,' he said.

Chair Martin Hindle paid tribute to his work in seven years as chief executive.

But patient and public involvement forum co-chair David Gorrod said: 'There has been very obvious friction between the strategic health authority and the trust for some time, partly because of the Pathway PFI project, but I suspect it also has to do with the government's intention to whittle down the acute sector and move care into the community.

'Peter Reading has always been a real champion of the trust and the staff. I suspect he has been less than docile. I suspect that the SHA has not seen eye to eye with the trust. I guess that he is the fall guy.'

A spokesperson for NHS East Midlands said: 'This is a local decision which has been made by the University Hospitals of Leicester trust.'

The trust confirmed that Mr Reading has been given six months' pay in lieu of notice plus£700,000 in additional pension contributions.

Mr Reading said the decision to abandon the scheme was fully supported by the trust board.

'I think in Leicester we have discovered further demonstrations of PFI's limitations. PFI is very poor at giving value for money in refurbished buildings,' he said.

'Once you have selected a preferred bidder the power of the NHS in controlling costs is less than in a conventional procurement. That said, PFI has delivered dozens of excellent new hospitals buildings that were not delivered in the 1980s and 1990s.'

Mr Reading was previously chief executive of University College London Hospitals trust and Lewisham and Guy's Mental Health trust.