Paul Hart's position as favourite to succeed Peter Reid at Leeds United significantly strengthened last night when it emerged George Graham is no longer on the club's shortlist.

Although Trevor Birch, the new Leeds chief executive, is an admirer of Graham's ability, the club have been put off by his apparent health problems and he has made it clear to his old employers that he would not entertain the idea anyway.

Graham is suffering from arthritis and is not as desperate for a return to management as is often perceived, particularly when it would mean moving out of London.

That increases the likelihood of Hart returning to the club where he worked as director of the youth academy in the early 1990s and severing his ties with Nottingham Forest, where his relationship with the chairman Nigel Doughty has become increasingly strained over the past few months.

As well as releasing a statement praising Hart for his "excellent job", Doughty is understood to have tried to initiate peace talks with Hart yesterday, but the 50-year-old manager has made up his mind he wants to leave.

Hart's appointment could mean a return to Elland Road for Republic of Ireland international midfielder Stephen McPhail, who is on loan at Forest.

If Hart gets his way, Glenn Hoddle is being lined up to replace him at the City Ground.

Before Leeds make their move, however, Birch wants to investigate Gordon Strachan's position at Southampton and, specifically, the rumours of infighting at St Mary's Stadium.

Information has reached the Elland Road hierarchy that Strachan has fallen out with his chairman Rupert Lowe and, though the details are sketchy, Birch will be keen to know whether the one-time Leeds captain is more attainable than was first anticipated.

Otherwise, Hart remains the outstanding candidate, not least because he seems to be the only contender who really wants it. As well as ruling out Graham, Leeds made it clear they do not fancy Gary Megson of West Bromwich Albion and have reservations about the credentials of Sheffield United's Neil Warnock.

In the meantime, the caretaker manager Eddie Gray's statement that he wants the job on a long-term basis will fall on deaf ears, although his time in charge of the team, however brief, is likely to incorporate important changes.

Gray wants to bring Danny Mills back from his season-long loan at Middlesbrough and, as well as ushering the striker Mark Viduka straight back into the first-team's plans, has waived the fines Reid imposed upon the Australian for various breaches of discipline over the last fortnight.

"I have no problems with Mark and I don't think he will have any problems with me," said Gray. "He is definitely an important member of the first-team squad, and I will handle him the best way I can. He is a great goal scorer."

Whether Viduka has a long-term future at Elland Road remains an issue that Hart will probably have to decide.

Speaking for the first time since his contract was terminated, Reid yesterday refused to criticise the club. "It's a pity I didn't have longer in the job and obviously I'm very disappointed things didn't work out differently but despite it all I enjoyed my time at Leeds," he said.

"I've always thought it was a great club and I still believe that. It's just a shame the circumstances weren't different, but it's been an honour and a privilege to manage Leeds United."