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• First coalition Tory cabinet minister to resign • Relentless revelations about Adam Werritty to blame • Philip Hammond named as new defence secretary The prime minister lost his first Conservative cabinet minister on Friday when Liam Fox folded under the pressure of relentless revelations about a close friend and the access he gained to the heart of government. Performing a reluctant reshuffle, David Cameron made minimal moves to the frontbench from his constituency home in Oxfordshire, replacing Fox by phone with the transport secretary, Philip Hammond, who in turn was succeeded by Justine Greening. No 10 said Fox had crumpled under the weight of this week’s news stories and could not bear to contemplate another weekend of claims surrounding his friendship with his best man, Adam Werritty. Fox’s departure came only hours after Werritty had been back for a second interview with the cabinet secretary, Gus O’Donnell. He has been conducting an inquiry into claims that his friendship with Fox potentially jeopardised national security and raised issues around conflicts of interest. Sources said Werritty’s evidence had not impressed O’Donnell and that the cabinet secretary was concluding Fox had repeatedly broken the ministerial code. Downing Street insisted it did not push Fox and that the prime minister had been prepared to tough out the relentless coverage and wait for O’Donnell’s report to be concluded. However, senior figures began to question whether he could survive that long with new allegations that emerged on Friday. They showed that some of the businessmen who were funding Werritty’s trips abroad had an interest in influencing defence policy. The Guardian was poised to report that two of Werritty’s financial backers had defence interests. This put into question Fox’s repeated assertion that neither he nor Werritty had profited from the 40 occasions they had met over the last 16 months. Fox had been insisting up until Friday morning that he would tough out the crisis, telling aides that he believed the O’Donnell inquiry would exonerate him from serious wrongdoing. He had also believed that his apology on Monday would take the sting out of any criticism from O’Donnell. But that changed quickly when word began spreading around Whitehall that the investigation was going to draw some harsh conclusions: both about Fox’s personal conduct, and the mosaic of business arrangements that Werritty was involved in. “I don’t think the resignation was a done deal until early in the afternoon,” said one Whitehall official. But the mood music from the Cabinet Office was that the inquiry was going to be very damaging. It didn’t leave Liam very much choice. He didn’t get a chance to say too many goodbyes. He was in his car on the way home by the time the statement came out.” Fox will now join the backbenches, where he enjoys some popularity, but he has been so wounded by the last week that the chances of his being a standard bearer for rightwing discontent have waned. While he will receive considerable sympathy for falling out of a top-level job he had spent his life working towards, many Tory MPs believe the revelations week have damaged him beyond repair politically. The shadow defence secretary, Jim Murphy, said Fox had his “deepest sympathy”, though Labour’s reaction also contained criticism of Cameron for allowing Fox to survive through the week. A Downing Street source acknowledged there had been some ambiguity about whether the report now needed to be completed, though O’Donnell is likely to continue with his work. Fox sent a resignation letter to the prime minister at just after 4pm but actually resigned in a phone conversation with Cameron. In his resignation statement, he repeated a formulation he had used in his apology in the Commons on Monday when he and his supporters thought he could still ride out the issue. He said: “I mistakenly allowed the distinction between my personal interest and my government activities to become blurred. The consequences of this have become clearer in recent days. I am very sorry for this. I have also repeatedly said that the national interest must always come before personal interest. I now have to hold myself to my own standard.” Fox said he was “proud also to have played a part in helping to liberate the people of Libya, and I regret that I will not see through to its conclusion Britain’s role in Afghanistan, where so much progress has been made. Their bravery, dedication and professionalism are second to none.” In his return letter, the prime minister emphasised that Fox and his wife Jesme Baird have “always been good friends” and that Fox had been a “key” member of his team who had done a “superb job” over the last seventeen months. He said: “On Libya, you played a key role in the campaign to stop people being massacred by the Gaddafi regime and instead win their freedom. You can be proud of the difference you have made in your time in office, and in helping our party to return to government.” Fox was a well-liked secretary of state for defence for his part in overseeing a successful campaign in Libya, though he did disagree with the prime minister over funding cuts to the armed forces. But the welter of allegations about Werritty, 34, eventually forced him to take a decision he had resisted all week. “He was fighting on too many fronts to survive,” said one official. The Guardian was the first newspaper to highlight Werritty’s closeness to Fox, which had been privately causing alarm at the MoD for months. A key issue was whether Werritty could be shown to have benefited financially from the friendship; that key link appeared to emerge on Friday. The Times reported that a corporate intelligence company with a close interest in Sri Lanka, and a venture capitalist keen on strong ties were said to have funded him with donations totalling £147,000. The MoD insisted that Fox’s resignation would not change the department’s strategy of reform. “The department knows where is it going. We have established a clear direction of travel and everyone will support the new secretary of state,” said an official. “That won’t be a problem for people in the MoD. We have got used to change.” Greening’s promotion is well won with an increased tally of women in cabinet an unexpected boon for the prime minister in a situation otherwise distracting for Cameron. Greening, who held the post in opposition immediately before the election, is economically fluent and ahead of the growth review to be delivered on 29 November, she strengthens the economic voices in cabinet. Liam Fox Liam Fox and Adam Werritty links Adam Werritty Defence policy Conservatives Allegra Stratton Nick Hopkins Rupert Neate guardian.co.uk