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Manager Peter Houston will leave Dundee United at the end of the season, the club have confirmed.

Houston, who was recently linked to Blackpool, has decided not to extend his contract, which expires in June.

United chairman Stephen Thompson had made an offer to keep his manager, but on reduced terms.

"He will remain fully committed to his role until the end of the season and will then leave with our best wishes and grateful thanks," said Thompson.

Houston added: "I understand and accept that changing circumstances mean that the board is under continued pressure to reduce costs, but I feel the time is now right for me to move on for a fresh challenge."

The 54-year-old, won the Scottish Cup months after replacing Craig Levein, making him the second United manager to win the trophy.

"We are all extremely grateful to Peter for all of his efforts over the last three years as manager and indeed in his previous role as assistant manager," said Thompson.

"In an ideal world, we would have had no hesitation in renewing contracts on a similar basis as originally provided. However, the world has changed in the last three years and we must realign the cost base of the business to the new economic reality.

"We are certainly not the only Scottish football club, or Scottish company, taking such action to ensure the future of the business and all of its employees."

Houston thanked the club's fans, players, staff and directors for their support.

And he added: "It is with sadness that I have arrived at this decision but feel that I have worked with the board to help them financially to reduce the debts and ongoing costs over the last three years and that there is a limit to how much we can continue to cut costs and continue to deliver what I want on the pitch."

Houston was granted permission to speak to Blackpool this week but does not appear to be in the running for the vacancy at Bloomfield Road.