Mark Hughes will not be the new Aston Villa manager and has been left without a club after walking out on Fulham on Thursday night. The Welshman had been the favourite to succeed Gérard Houllier but Villa, unimpressed with the course of events that culminated in Hughes activating a break clause in his contract and leaving Fulham, have turned their attention elsewhere. Martin Jol and Steve McClaren are at the top of Villa's shortlist.

In a further twist Jol and McClaren, who are out of work and eager to return to employment in the Premier League, will also be leading candidates to take over at Craven Cottage, where Hughes had been expected to sign an improved two-year contract. Martin O'Neill, a former Villa manager, will be another major contender for that post.

Mohamed Al Fayed, the Fulham chairman, was furious after Hughes activated the break clause and tendered his resignation. A Fulham spokesperson said: "The chairman became increasingly annoyed by Mark positioning himself for another club, whilst still negotiating with us, and having agreed terms."

Fayed was, however, ready to extend Hughes's deal. One view from sources at the club is that contract talks with Hughes fell apart when Fulham felt unable to match the fees demanded by his representative, Kia Joorabchian.

Villa's reluctance to move for Hughes comes as something of a surprise. He has been the frontrunner for the Villa post since it emerged this week that Houllier would be stepping down on health grounds. Villa, however, told Fulham that they would not be making an approach for Hughes in the hours before his decision to leave.

The Midlands club have since made it clear that their stance has not changed after Hughes's departure from Fulham. It is understood they would have grave reservations about appointing the former Blackburn Rovers and Manchester City manager because of how his departure from Fulham has been handled.

Hughes, who is on holiday in Dubai, said in a statement: "I would like to take this opportunity to clarify that neither myself nor my representative have approached or have been approached by another club. This decision to leave Fulham has not been influenced by any outside party."

When Villa parted company with Houllier on Wednesday evening, Fulham believed that Hughes would stay loyal to them, as Fayed had done with him on Boxing Day, when the Craven Cottage crowd had called for Hughes's sacking after a 3-1 home defeat by West Ham United that dropped the club into the relegation zone. Hughes's new contract had even gone to the lawyers, with the terms and conditions agreed, in readiness for his signature.

Yet in the hours that followed Villa's announcement of Houllier's departure, Hughes went cold on Fulham – and nobody at the London club considered the two events to be unrelated. What Fulham could not understand, however, was that Paul Faulkner, the Villa chief executive, had made it clear to Alistair Mackintosh, his counterpart at Craven Cottage, with whom he gets on well, that Villa did not want Hughes. The Welshman, who describes himself as an ambitious young manager, may have taken a leap of faith as there was a deadline of midnight on Wednesday on the activation of his break clause. The clause permits him to walk away from the club as a free agent at the end of June. Premier League rules prevent him or his representative from contacting or being contacted by other clubs until after that.

His back-room entourage, which includes Mark Bowen, Eddie Niedzwiecki, Glyn Hodges and Kevin Hitchcock, remain under contract at Fulham for another year, with no break clauses in their deals.

Fulham accepted Hughes's resignation and their impression was that he thought he would get the Villa job, despite the assurances they had received from Faulkner that he would not. Fayed is clear that there is no way back for Hughes at the club. "Roy Hodgson appreciated the club after he had left and [Fayed] believes Mark will do the same," a spokesperson said.

Villa say they have an open mind about filling their vacancy. Speculation that Carlo Ancelotti is among their leading candidates is wide of the mark, however. The former Chelsea manager has not received any contact from Villa and he is known to have no interest in the position. Ancelotti, according to sources close to the Italian, is holding out for a club that can offer Champions League football. Roberto Martínez, the Wigan Athletic manager, has, however, emerged as an outsider for the Villa post.

O'Neill, who has been out of work since leaving Villa last August, is the bookmakers' favourite for the Fulham jobAs well as Jol and McClaren, other names likely to feature on Fulham's shortlist may include Gianfranco Zola, the former West Ham manager, and Chris Hughton, who led Newcastle United back to the Premier League at the first attempt before being sacked in December. Jol had been Fulham's No1 target last summer, ahead of Hughes, and he had wanted to come. He was blocked by his then club, Ajax.