Britain's Defence Secretary Liam Fox, center, a fierce advocate of Britain’s alliance with the United States, has quit amid a conflict-of-interest scandal. (Stefan Wermuth/Reuters)

Britain’s hawkish defense minister, Liam Fox, resigned Friday amid a mounting conflict-of-interest scandal, vacating his job at a critical juncture in British military planning and dealing a blow to Prime Minister David Cameron’s government.

A fierce advocate of Britain’s transatlantic alliance with the United States, Fox stepped down as a scandal surrounding his professional relationship with his best man and former roommate was dramatically escalating in the British news media.

Fox’s exit prompted a quick round of changes in the British Cabinet, with Cameron replacing him with Philip Hammond. Hammond, previously the transportation minister, is viewed as a rising star, but has limited experience in military affairs.

Fox has been under investigation for granting extraordinary access to high-level meetings to his friend Adam Werritty, who advertised himself as a British government defense adviser even though he held no official post. But in recent days, fresh revelations have emerged, including reports that Werritty was being bankrolled in part by a private intelligence firm owned by billionaire Poju Zabludowicz.

Fox and Werritty shared numerous trips together and held international high-level meetings despite Werritty’s lack of government status, including one in Dubai in which Werritty appeared to provide a direct channel to Fox for defense industry interests. They were also reportedly involved in running a Conservative charity with pro-U.S. ties from Fox’s government office.

Cameron had appeared willing to wait until the results of the inquiry into Fox’s actions were due next week before making a call on his fate. But on Friday, Fox concluded that the gathering storm around the daily revelations about his links to Werritty made his position untenable.

Fox did not admit to violations of ministerial rules, compromising national security or profiting from the relationship with Werritty. In a resignation letter, however, he seemed to concede the impression of impropriety. “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.”

Fox’s departure amounts to the highest-level Cabinet loss for Cameron since his Conservative-led coalition came to power in May 2010. Fox was seen as one of the most conservative members of Cameron’s Cabinet, with Britain engaging in active military operations in Libya during his tenure. Fox also has sought to fight deep cuts in Britain’s military budget, arguing in favor of maintaining a strong military alliance with the United States.

Analysts said it appeared unlikely that Hammond would steer the nation’s defense strategy in a markedly different direction. But Fox was a darling of the British right wing, whose members have been griping that Cameron’s government — a coalition with the Liberal Democrats — is already too progressive. And the appointment of Hammond, a relative moderate, could dissatisfy some of the most conservative in Cameron’s party.

“The real loser is the right of the party,” said Tim Montgomerie, editor of the influential Web site. “I don’t think that Cameron is hugely affected, but the right is significantly weaker.”

In accepting Fox’s resignation Friday, Cameron extolled the virtues of his tainted defense minister. But given Britain’s current defense demands as it winds down operations in Afghanistan and Libya, he added, the resignation made sense in light of the unrelenting scandal.

“I quite understand why Liam Fox has decided to resign,” Cameron said.

Special correspondent Karla Adam contributed to this report.