City owner Thaksin Shinawatra is understood to have been upset by Eriksson's failure to replicate the positive results of his early months at Eastlands and his handling of the squad. If he is replaced, City's first choice as replacement is believed to be Portugal coach Luiz Felipe Scolari, who will become available after his country's Euro 2008 campaign is over.

According to a source familiar with City's politics, Thaksin upbraided Eriksson over his part in an internal club dispute. The source said: 'Thaksin rang Sven to reprimand him, telling him he would be sacked at the end of the season if results did not improve.'

It is further understood that agents attempting to negotiate deals with City in recent weeks have been told not to factor Eriksson into their equations because the club does not necessarily expect the manager they appointed last summer to be present for a second season at there.

Despite yesterday's victory at Sunderland, Eriksson's team have won just five of their 17 Premier League and FA Cup fixtures this year. Having spent significant parts of the season in the Champions League places, they have slipped to eighth in the division. Eriksson has, however, equalled the club's highest top-flight points total since the reduction to 20 teams, with four fixtures still to play.

City last night denied that there was any problem between Eriksson and Thaksin, insisting that the owner was happy with how the season had progressed and would be content with a top-10 finish. But they did concede that, should Eriksson leave at the end of the season, his status in European football was such that an approach from another club for the manager would not come as a surprise.

From Guardian Unlimited