Villa today insisted Martin O’Neill’s relationship with owner Randy Lerner remains intact after rubbishing reports the boss had quit the club.

Odds on O’Neill, who works on a 12-month rolling contract, vacating the Villa Park hotseat tumbled from 66-1 to 7-1 yesterday when radio and internet reports claimed the Northern Irishman had decided to end his four-year tenure after disagreements with Lerner over the direction of the club.

The rumour is believed to have begun on Monday night via an unofficial website claiming O’Neill had quit after being told by the club’s American owner that he must trim the club’s £70m wage bill in the summer.

Then, by yesterday afternoon, it had been broadcast in the news bulletin of a national radio station as well as on websites.

But within 30 minutes they were forced to backtrack after Villa sources insisted there is “not a grain of truth” in reports of a resignation or rift. The club are unwilling to comment officially, however.

Despite falling to their heaviest ever Premier League defeat on Saturday – a 7-1 drubbing at the hands of Chelsea – the boss’ departure would have come as a major surprise with Villa facing an FA Cup semi-final against the same opposition in just 10 days’ time.

However, the Northern Irishman is facing arguably the most difficult spell of his reign at present with the disappointment of last month’s Carling Cup final defeat to Manchester United last month having been now almost-certainly been compounded by the disappointment of another failed Champions League challenge.

His team were also recently booed off by some supporters in the draw with Wolves.

It is understood O’Neill conducted a post-mortem into the weekend demolition – a result he admitted to being the worst of his career – with his team on Monday.

The squad, several of whom have complained of burn-out in recent weeks, have been allowed time off until Friday to recuperate ahead of Saturday’s trip to Bolton.

Despite spending £37m last summer – he reclaimed £16m from the sales of Zat Knight and Gareth Barry – the Villa boss has cast doubt over whether his squad is any stronger this season.

However, there was a potential taste of what could lie ahead in future transfer windows when he admitted he had to ‘sell to buy’ in January and, ultimately, Craig Gardner’s exit to Birmingham was Villa’s only business dealing.