Thank you all for your very helpful advice which has resulted in me finding the problem, the collet does lock into the nut with a click however it doesn't withdraw the collet, but I found another chuck, a MT3 one, and this nut fits the MT2 one as well, this was assembled the same way and works, I've just tried both a couple of times more and the results the same, the MT2 nut must have a fault, it was just a cheap one but it will suffice now I have a nut that fits.
Thanks for pointing me in the right direction, the Arc Euro page is very good.
Thanks
John