Norfolk and Suffolk's mental health trust has become the second Norfolk trust this week to withdraw from scheme which could have seen it become a mutual part-owned by staff.

The Norfolk and Suffolk Foundation Trust's decision follows the decision of the Norfolk and Norwich University Hospital (N&N) to opt out of becoming one of nine pathfinder trusts examining mutual ownership.

Chief executive Michael Scott said the decision had been taken by the board in light of feedback from staff and the trust's other priorities. The trust was rated 'inadequate' by the Care Quality Commission, which recommended it be put in special measures.

Mr Scott said: 'There has been a level of misunderstanding about the project and the aims of our trust in taking part. We can see that this has led to concern among our staff about a risk of 'privatisation of the NHS'.

'We are clear that our trust's priorities are improving the quality of our services and improving staff morale, by making the trust a better place to work. Anything that might create a distraction to these priorities is not for us at this time. As a result the trust has decided to withdraw from the project.'

The Mutuals in Health Pathfinder Project had been backed by health minister and North Norfolk MP Norman Lamb, who said earlier this week he was 'immensely disappointed' at the N&N's decision.

The NSFT's withdrawal has been praised by the union Unison, whose members voted unanimously against the proposal.

Carol Briggs, joint Unison NSFT branch secretary, said: 'We welcome this swift action taken by the board of directors. It's vitally important that staff on the frontline are listened to. Our members told us clearly that they had no interest in leaving the NHS, and our involvement in this project was at risk of further damaging morale.

'We look forward to working constructively with the board to find ways of improving staff engagement and making sure that staff well being is at the heart of the future direction of NSFT. All our staff want is to have the resources that they need to provide high quality care for everyone who needs our service. We hope this move signals a fresh approach from the board in responding to the genuinely held concerns of staff.'

Mr Scott said he hoped the decision would reassure staff their views were being heard.

The NSFT will inform the Cabinet Office and regulator Monitor before making the announcement to staff today.