The dismissal of Julian Smith as Northern Ireland secretary just over a month after he oversaw the resumption of the Stormont assembly has raised alarm about the loss of a minister seen as diligent and trusted at a crucial and potentially perilous time for the region.

His sacking by Boris Johnson will fuel speculation that No 10 wants someone in the position who will pursue a harder line on ending “vexatious” prosecutions of military personnel involved in the Troubles.

Stephen Farry, the Alliance MP for North Down, told the BBC there may have been differences between Smith and Downing Street on subjects including Brexit and “legacy” issues.

One senior official in Northern Ireland said Smith’s sacking was more to do with “Tory party internal politics than the interests of Northern Ireland”.

The region has just had power sharing restored after three years and is embarking on a new post-Brexit status under which it will in effect remain in the EU single market while the rest of the UK leaves.

Leo Varadkar, Ireland’s outgoing taoiseach described Smith on Twitter as “one of Britain’s finest politicians of our time”. He tweeted: “In eight months as secretary of state, Julian, you helped to restore powersharing in Stormont, secured an agreement with us to avoid a hard border, plus marriage equality.”

The leader of the Social Democratic and Labour party in Northern Ireland said Smith’s sacking was a “strategic error”. Colum Eastwood, recently elected as an MP, said: “It defies belief that after the successful restoration of power sharing following a three-year collapse, Julian Smith’s reward is a Cabinet Office P45.

“It tells you all you need to know about Boris Johnson’s attitude to the north that he would sack the most successful secretary of state in a decade. He is at best indifferent.”

Smith, who was chief whip under Theresa May before being moved to the Northern Ireland role in July, was the first casualty of the prime minister’s reshuffle on Thursday. He tweeted to say that it had been “the biggest privilege” to do the job.

There was a fightback looming over briefings that Smith had lost his job because No 10 was concerned at how elements of the Stormont deal were pushed through, notably relating to retrospective investigations of the actions of British troops. His allies rejected this.

As part of the deal under which Stormont returned, the government pledged, within 100 days, to introduce legislation to implement a legacy deal struck five years ago, but MPs such as Johnny Mercer and Mark Francois have been campaigning for a complete amnesty for army veterans who were involved in deaths in Northern Ireland.

Arlene Foster, the Democratic Unionist party leader, said she and Smith “may not have always agreed (we did sometimes) but his dedication to the role was incredible”.

“He was here at a very difficult time and there is no doubting Julian’s dedication to the job,” she said.

Simon Coveney, Ireland’s deputy prime minister, tweeted that Smith had been “such an effective SOS for NI at a time of real challenge & risk”, adding: “Without your leadership I don’t believe NI would have a Govt today.”

Smith was praised for his engagement in all corners of Northern Ireland and for efforts to make progress on stagnant issues that had been toxic to predecessors.

“Julian’s engagement and outreach compared to Karen Bradley was like chalk and cheese,” a senior Belfast official said. “His removal does not augur well really for Northern Ireland. To ask him to go at a time when Brexit is going to have huge impact and the fragility of Stormont is there, shows the government is not taking its responsibilities seriously.”

The campaigner against institutional abuse Margaret McGuckin said Smith had been a transformative presence and had reached out to survivors, unlike Bradley.

“He would phone us up at night-time. At weekends he worked hard. I’ve never met a politician or an authority figure like him.

“It’s a very wrong decision … our people here will be suffering more. We were looking forward, the future we thought was brighter and that was because of Julian Smith,” she said.