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O'Neill quits over transfer budget and Milner sale

US coach Bradley is favourite for Villa job after Lerner refuses to back manager's spending plan

Martin O'Neill's difficult relationship with the Aston Villa owner, Randy Lerner, finally cracked yesterday when O'Neill left the club just five days before the start of the new Premier League season following long- running disagreements over transfer funds for new players.

It has been an open secret in football this summer that Villa have been unwilling to move forward on the acquisition of players because O'Neill had not come to an agreement over the transfer funds to be made available to him.

While O'Neill wanted investment in transfers again this summer – he believed that Villa had to spend £30m each summer just to maintain their position – Lerner and the club's hierarchy felt that they had already paid out significant sums on transfer fees and wages. They also believed that they had paid out for certain players who had not gone on to establish themselves in the first team.

O'Neill's relationship with Lerner deteriorated last season with the club forced to deny reports in March he had walked out. By Friday he was not even on the touchline for the friendly against Valencia. In O'Neill's departure statement it was telling that he omitted the American chairman from those he thanked for their service.

The imminent sale of James Milner to Manchester City in a deal worth £24m has also increased the tension at the club. Last week, when Milner was left out the Villa squad for the Valencia game as a precursor to the deal, O'Neill raised doubts around the assumption that Lerner would allow him to reinvest money from Milner's sale. O'Neill said: "Did he?" when it was put to him that Lerner had made such assurances.

O'Neill added: "I need to speak to the chairman. For a number of days in this transfer saga with Manchester City, you have known my position in terms of what I have been advocating and thinking about. But it really has been the chairman [Lerner] and chief executive [Paul Faulkner] who have been dealing with it."

The Villa board has told O'Neill in the past that it cannot sustain the level of investment that Lerner has made in the club in recent years and have pointed to players signed by the manager who have not made the grade. Those include Curtis Davies (£8m), Nigel Reo-Coker (£7m), Steven Sidwell (£5m), Nicky Shorey (£3.5m), Emile Heskey (£3.5m) and Habib Beye (£2.5m).

There have also been suggestions that Ashley Young could be another potential sale this summer – with Tottenham Hotspur his destination – although that deal would still require a lot of negotiation.

The United States national team coach, Bob Bradley, was installed as a favourite to succeed O'Neill – potentially an intriguing move from Lerner. In the meantime, the reserve team coach Kevin MacDonald will take charge of the Villa team for the game against West Ham on Saturday.

Lerner, who inherited the then recently appointed O'Neill when he bought the club from Doug Ellis in 2006, has invested around £90m of his own money in players. In that time, the club have twice broken their transfer record in signing Milner for £12m from Newcastle United two years ago and then Stewart Downing for roughly the same price last summer. Ashley Young cost £9.65m from Watford in January 2007.

In return O'Neill has delivered three successive sixth-place finishes in the Premier League but the rise of Manchester City, in particular, has had an effect on their attempts to break into the top four. As well as Milner, City also signed the then Villa captain Gareth Barry last summer.

Regarded as a potential successor to Sir Alex Ferguson at Manchester United – and only just overlooked for the England manager's job in 2006 – it remains to be seen how O'Neill's departure from Villa will affect his long-term prospects. He is one of the brightest managers in the Premier League and, at 58, he is coming into arguably his prime years as a coach.

O'Neill said last night that he had enjoyed his time at the club "immensely". He said: "It's obviously a wrench to be leaving such a magnificent club. I would like to pay tribute to the players, my coaching staff and the supporters for all the support and encouragement they have given both the club and me during my time as manager. I wish them all the best for the future. I will obviously be assisting the club with regard to the handover of my duties."

The Villa chief executive, Paul Faulkner, said: "The club would like to thank Martin for the great work he has done at Aston Villa over the past four years. He has helped to establish the club in the upper echelons of the Premier League, has taken us to Wembley and we have qualified for European competition for the past three seasons. We wish him the best in the future."