Theo Walcott's Arsenal contract talks to continue into new year

Theo Walcott's contract dispute with Arsenal is set to continue into the new year, despite Gunners boss Arsene Wenger issuing a Christmas deadline.

Walcott has so far rejected Arsenal's attempt to re-start formal negotiations but talks are expected to resume.

The England forward, 23, could sign a pre-contract agreement with a foreign club from 1 January or join a Premier League side for free in the summer.

Liverpool, Chelsea, and both Manchester clubs have indicated an interest.

Wenger said he does not want Walcott to leave in the upcoming transfer window, even if that opens the possibility of him departing for nothing at the end of the season.

But the Frenchman made similar suggestions about Samir Nasri and Robin van Persie as they entered the final year of their contracts, only to see them sold to Manchester City and Manchester United respectively.

Liverpool are keen to recruit Walcott in January, Chelsea and Manchester City would rather wait until the summer - unless he is put up for sale in the new year - and Manchester United have asked to be kept informed.

City pursued Walcott last summer and had a bid rejected before the transfer window closed.

Walcott's preference is to stay with Arsenal if they meet his wage demands and offer him opportunities to play as a central striker having spent most of his Gunners career on the wing.

They are prepared to raise his salary from £60,000 a week to £75,000 a week, but the Southampton academy graduate is holding out for closer to £100,000 a week.

Walcott may choose to delay his decision until the summer, at which point he would know how the season had materialised for both himself and Arsenal.

But it is understood the main reason negotiations have not recommenced is the player's anger at being relegated to the substitutes' bench after he turned down the improved contract.

Although Walcott has started each of the last five matches he has been available for, earlier in the campaign he started just three of 13 matches when fit.

He is Arsenal's top scorer this season with 10 goals in 17 appearances and when asked on Friday if Walcott would be a part of the club's long-term future, Wenger replied: "I believe so, yes."

Arsenal signed the then 16-year-old Walcott from Southampton in 2006 for an initial £5m rising to £12.5m. He has scored 30 goals in 161 league appearances for the club and has 30 caps for England.