Keegan pushed to brink as Newcastle deny 'sack' story

Newcastle United said last night that that they wish to retain Kevin Keegan as manager of the Tyneside club, but after a long, uncertain day at St James' Park it appears Keegan's second tenure is over. The perception is that Keegan has been forced out and this is now expected to descend into an argument about employment law, semantics and compensation of as much as £8million.

There was no official confirmation of Keegan's departure but it was accepted last night that when Keegan drove off from his Ponteland home yesterday morning it was to stop off at St James' to verify his departure just over seven months into his second spell as manager. It was said that having pushed Keegan to the brink of resignation, Newcastle then realised the consequences within their fanbase – which is hugely supportive of Keegan – and spent the hours after that trying to talk Keegan around. Hence the confusion.

Keegan feels compromised by the position of Dennis Wise above him in recruiting players and, having asked to be judged at "midnight on Monday" over the controversial sale of James Milner to Aston Villa last Friday, Keegan saw the transfer deadline pass with only two signings come in, both from Spain and one of them on loan. He did not get the new left-back he asked for in May.

Keegan is understood to have vented his anger at managing director Derek Llambias over transfers on Sunday and Monday, with owner Mike Ashley possibly intervening to try to dissuade him from walking out. It is not thought conciliation worked and the Newcastle's statement's reference to the club "progressing with its long-term strategy" suggests that Wise will not be moved on.

"Newcastle United can confirm that meetings between members of the Board and manager Kevin Keegan were held both yesterday and today," began Newcastle's statement. "Kevin has raised a number of issues and those have been discussed with him. The club wants to keep progressing with its long-term strategy and would like to stress that Kevin is extremely important, both now and in the future. Newcastle United values the effort and commitment shown by Kevin since his return to St James' Park and wants him to continue to play an instrumental role as manager of the club. For the avoidance of doubt the club has not sacked Kevin Keegan as manager."

It is not known if that last sentence was a reference to Keegan resigning, which would have implications for any pay-off. Keegan signed a three-and-a-half year contract when he succeeded Sam Allardyce in January and would be entitled to compensation if dismissed. The words and phrase used could be worth millions of pounds.

One version of events is that Keegan was told of Newcastle's signings on Monday and of future transfer policy and replied that, if that was the case, it would be happening without him. That may have been taken as a resignation, an interpretation Keegan's and Newcastle's lawyers will scrutinise.

The situation left Newcastle players and fans dismayed. More than one senior Newcastle player privately described the anticipated loss of Keegan as "a shambles", while supporters are considering boycotting the next home game, against Hull City on Saturday week. At the bookmakers there was a rush of money for Gustavo Poyet as a possible successor. Poyet was once the team-mate of Wise at Chelsea and his assistant when Wise was manager of Swindon Town and Leeds. Poyet is currently Juande Ramos's assistant at Tottenham.

The speculation surrounding Keegan began with his failure to take training yesterday morning, when Chris Hughton stood in. But Keegan's absence was also noted at St James' on Monday night when he missed Newcastle reserves' game against Sunderland. Normally Keegan sits alongside Terry McDermott but it was Hughton there.

Keegan's absence was said to have resulted from a confrontation with Llambias over transfer policy. Last Tuesday Keegan had called the possibility of selling Milner "unthinkable". Three days later, doing the club's PR for them, he asked for time, hoping that Newcastle would be able to recruit "three or four" new players over the weekend.

One of these, Keegan hoped, would be the Germany international Bastian Schweinsteiger. The failure to complete that transaction cannot have pleased Keegan, who meanwhile discovered that Newcastle were prepared to sell Joey Barton and Michael Owen. Keegan has risked his reputation in backing Barton following his release from prison this summer. On Owen, Keegan has been firmly behind the England striker since April, when the issue of a contract extension was first raised.

As Monday's deadline came and went, Newcastle brought in only two players, one of whom, Ignacio Gonzalez, is on loan from Valencia. Xisco, from Deportivo La Coruña, is a striker who has cost an initial £5.7m.

But as Keegan may have pointed out, Newcastle already have a number of options up front. The fact that he is unlikely to have seen either Xisco or Gonzalez in the flesh is another consideration, a reminder to the manager that he has not been, and will not be, in complete control of who plays for his team.