Liverpool will open talks with Steven Gerrard's representative this week over a new contract with manager Rafael Benitez insisting he would not contemplate selling the midfielder.

Gerrard is on holiday but his agent, Struan Marshall of SFX, has returned from his honeymoon and will be at work today. Liverpool chief executive Rick Parry will offer the 25-year-old a two-year extension to his current deal, which has two years to run, on improved terms in a bid to deflect persistent interest from Real Madrid and Chelsea.

"Gerrard is a vital player for us and that is why we have not considered selling him," said Benitez, who has fielded two telephone calls from Arrigo Sacchi, Real's director of football, asking about Gerrard's availability. "I am not in favour of selling him and we are building a great team around him because we want him to be the skipper who wins the most titles in Liverpool's history."

Chelsea and Tottenham have made progress in their attempts to settle on compensation for Frank Arnesen's impending move from White Hart Lane to Stamford Bridge and the clubs hope a deal can be struck this week. The settlement is unlikely to include the Chelsea striker Carlton Cole moving to Tottenham.

Newcastle chairman Freddy Shepherd insists Graeme Souness must be the man who decides whether Craig Bellamy plays for the club again. The 25-year-old spent the second half of last season on loan at Celtic after his bust-up with Souness, who has since promised Bellamy will never feature in his team again.

Shepherd also confirmed midfielder Lee Bowyer will be welcomed back to Tyneside if his proposed move to Birmingham cannot be salvaged.

Middlesbrough's manager Steve McClaren is poised to sign a new four-year deal after agreeing terms with chairman Steve Gibson.