A 14-year-old boy arrested on Monday in connection with a huge blaze at the former Sharoe Green Hospital site at the weekend has been released on police bail.

The fire, which police are treating as arson, started at about 1.50pm on Sunday in the former outpatient unit on Sharoe Green Lane, Preston.

Almost half of the derelict single-storey building, due for demolition for a residential development, was destroyed in the fire.

Lancashire Teaching Hospitals NHS Trust, which owns the site, has been counting the cost of the damage.

Director of facilities and services, Ian Cox, said: "Because it is going to be demolished, the only money we will have to spend is to make the site safe, clearly if we were going to put the building back into use it would cost a lot more."

He said he could find no other explanation for the fire than arson, and the trust had introduced extra security to the site in December 2005, following numerous acts of vandalism.

The massive fire fighting operation at the site, which closed in June last year, involved more than 50 firefighters, ten pumps, an aerial ladder platform and a specialist environmental unit. A spokesman for the fire brigade said: "Initially we were fighting it defensively to make sure it did not spread. Quite a lot of our resources were used up looking for people in the building as originally it had been reported that someone was trapped inside."

After a thorough search no one was found.

So much water was used fighting the fire that a specialist environmental unit was deployed to collect the toxic run-off, so it could be disposed of safely.

A spokesman for the police confirmed the fire was being treated as arson and a 14-year-old boy had been released on bail pending further inquiries.