Lady Butler-Sloss has resigned from her position as head of an inquiry into claims of child sex abuse at the heart of the British establishment and how public institutions dealt with them.

The retired High Court judge told home secretary Theresa May of her intention to quit at the weekend.

Butler-Sloss had faced accusations from victims groups that she was not an appropriate appointment, as her brother was attorney general of the government at the time in the 1980s when sex abuse allegations were allegedly covered up.

Downing Street insisted the decision to quit was entirely her own. Critics said it called in to question the government's judgement in the case.

In statement, Butler-Sloss admitted to not having "sufficiently considered" a potential family conflict.

She said: "It has become apparent over the last few days, however, that there is a widespread perception, particularly among victim and survivor groups, that I am not the right person to chair the inquiry.

"It has also become clear to me that I did not sufficiently consider whether my background and the fact my brother had been attorney general would cause difficulties."

Labour MP John Mann said the government knew about potential conflicts of interest, but ploughed ahead with the appointment anyway.

"No 10 knew there were conflicts of interest," he said on Twitter. "The reason Butler-Sloss was appointed will itself become a major issue."

Fellow Labour MP Tom Watson greeted Butler-Sloss's resignation as "testament to her integrity."

Watson raised the possibility of a child sex ring in parliament in 2012 with an explosive question at PMQs.

A spokesman for prime minister David Cameron said: "Dame Elizabeth has taken the decision to step down as the head of the panel inquiry. It is entirely her decision.

"Understanding and respecting her decision, the government's view has not changed: that she would have done a first-class job as chair of the panel. But she has taken that decision."