Sven-Göran Eriksson last night held negotiations with officials from Benfica as he pondered his next step after his impending dismissal from Manchester City. Three officials from the Portuguese club flew to Manchester to speak to the former England head coach at the Radisson hotel, in the city centre, but the Swede is understood to have left the meeting with an open mind, preferring to keep his options open rather than make an immediate decision.

Eriksson was caught on camera by a Portuguese television crew as he left the hotel – followed swiftly by LuÍs Filipe Viera, the Benfica president, Rui Costa, the midfield player who is about to take on a role as sports director, and Pablo Gonçalves, the club’s legal adviser - rekindling memories of the exposure of his clandestine meetings with Chelsea officials during his time as England head coach. After the second of those occasions, in the spring of 2004, Eriksson was rewarded with a pay rise by the FA, but this time he firmly expects to be greeted with his P45 from Thaksin Shinawatra, the City owner who hopes to replace him with Luiz Felipe Scolari, the Portugal and former Brazil coach.

It is feasible that Eriksson may have jeopardised his chances of a full payoff by being caught in flagrante with another club, but the Swede would argue that his position had already been left untenable by Thaksin’s treatment of him in recent weeks.

Through his right-hand man, Taweesuk “Jack” Srisumrid, and a Brazilian intermediary, Thaksin has already made an offer worth £3.2 million a year to Scolari, who has been told to make his decision before leading Portugal into the European Championship finals next month. Scolari’s spokesman, Acaz Fellegger, said last night that the 59-year-old’s future “will only be decided after the Euro tournament”, a stance that could prompt City to look elsewhere.

Speaking at a golf tournament in Beijing yesterday, Thaksin declined to discuss Eriksson directly and even made light of his recent criticism of the team’s performance, but he could hardly be said to have issued a vote of confidence as he repeated his mantra that he would review the manager’s position at the end of the season.

“They are all – Sven, Scolari, [José] Mourinho – great coaches, great managers,” Thaksin said. “During the season, we may complain for improvement, but that’s normal for every club. But we will discuss at the end of the season what needs to be changed and what needs to be added at the club.”

From the moment he held talks with Thaksin on April 27, though, Eriksson has been in no doubt that he will be replaced at the end of the season and has already begun to plan for life after City, as his agent, Athole Still, said last week that he would have to. It remains unclear, however, whether the 60-year-old would be tempted by a return to Benfica, where he has had two successful spells, between 1982 and 1984, and then from 1989 to 1992.

The Lisbon club have had a wretched campaign and are struggling to qualify for next season’s Champions League, forcing them to look for a replacement for Fernando Chalana, the coach. Car-los Queiroz, the Manchester United assistant manager, was another potential target, but he is thought to be eager to stay at Old Trafford.

City, worryingly, face a battle to retain the services of Michael Johnson, their highly rated midfield player, with Tottenham Hotspur joining Arsenal in expressing interest in the 20-year-old. Arsène Wenger, the Arsenal manager, has identified Johnson as a potential replacement for Mathieu Flamini, who will join AC Milan on a free transfer at the end of the season, but Tottenham are also interested, despite having already committed £16.5 million to signing Luka Modric, the Croatia midfield player, from Dynamo Zagreb.

Johnson signed a new four-year deal with City last August, but although the club met representatives of the player in February to discuss an improvement on his basic wage of £12,000 a week, talks about a new contract appear to have been put on hold as the club contend with the disarray brought about by Eriksson’s impending departure. Several players are said to be unhappy at the prospect of losing a manager who has steered them to a top-half finish in the Barclays Premier League, among them Richard Dunne, the captain, who was voted City player of the year for the fourth consecutive season this week.