Lancashire said their contracts would be ended by "mutual termination".
Two early wickets have put New Zealand in control of the second Test in Hamilton as England ended the Day 2 on a nervy 39/2.
Virat Kohli became the first Indian to hit a century in Day-Night Test, a feat that has helped him reduce the gap with his Australian rival and top-ranked Test batsman Steve Smith.
Resuming their second innings at 55/3, none of the England batters could stay long at the crease as they got bowled out 197 in the final session of Day Five at the Bay Oval and suffered a crushing defeat by an innings and 46 runs.
BJ Watling, 34, who made 205 off a staggering 473 balls over two days, studded his knock with 24 fours and a six.
New Zealand secured a remarkable final session victory by an innings and 65 runs as they dismissed the hosts for 122 in fading light.
Needing to win at P Sara Oval, New Zealand did just that to claim 60 points in the WTC.
BJ Watling, who started the day on 81, went on to complete his seventh Test century.
Watling lost his overnight partner Colin de Grandhomme early after the tourists resumed the final day's play on 382 for five but went on to stretch their lead to 187 in Colombo.
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