The Aston Villa manager John Gregory's proposed multi-million-pound spending spree began last night with the signing of Newcastle's utility defender Steve Watson. Gregory agreed to pay £4 million for the 24-year-old, who is expected to make his debut at West Ham on Saturday.

David Batty was also interesting Gregory, but it appears that the Villa manager has cooled on that deal because of the midfielder's wage demands, reported to be around £20,000 a week.

Gregory is still hoping to persuade Blackburn Rovers to part with Chris Sutton for £10 million, but he is aware that Tottenham Hotspur are also showing an interest in the striker.

Blackburn, meanwhile, look set to allow the Swedish striker Martin Dahlin to join Hamburg on loan until the end of the season.

Martin O'Neill has assured Leicester City that he will not walk out on them but still insists he has a right to speak to Leeds about their managerial vacancy.

O'Neill had extensive talks with his club's chairman John Elsom yesterday after the Filbert Street board again refused Leeds permission to speak to their manager.

Queens Park Rangers have denied reports that Gerry Francis has returned to the club as director of football. A spokesman said: "We are interviewing, but nothing has been decided. We hope to make an announcement in the near future."