DAVID MOYES wrote off a potential £3m compensation payment last night as he resigned as Sunderland manager following a frank discussion with Ellis Short that confirmed the financial restrictions that will be in place this summer.

Moyes tendered his resignation after meeting Short and chief executive Martin Bain in London as he did not feel he would be able to successfully rebuild his current squad with the budget that would be available to him in the wake of relegation.

Short remains keen to sell his 100 per cent stake in the Black Cats, and with the club’s debts currently standing at around £110m, the Irish-American businessman is determined to keep spending to a minimum this summer.

While Sunderland will bank a £44m parachute payment following their relegation from the Premier League, their income will drop by around £70m as they miss out on the top-flight’s lucrative television deal.

Short wants to use the funds raised from player sales to plug some of the gap, meaning that even if Moyes was to have agreed to the departure of Jordan Pickford, Lamine Kone, Fabio Borini and Wahbi Khazri, he would not have been able to spend the money generated by their exits.

The current squad is in need of a major overhaul, with eight players due to leave at the end of their contract, three players heading off at the conclusion of their loan deals and Jermain Defoe set to leave for nothing because of a relegation release clause. Defoe is already understood to have initiated talks with Bournemouth.

Moyes was also unhappy with the attitude of a number of players in the current squad, having publicly voiced his frustration at the escalating injury problems in the final weeks of the season.

He felt some players had thrown in the towel and were effectively refusing to play, and it is understood at least two members of the current squad made themselves unavailable for Sunday’s defeat at Stamford Bridge.

Moyes’ frustration at Kone’s attitude has been apparent all season, and he has also criticised Khazri, Borini, Adnan Januzaj and Jason Denayer both publicly and privately throughout the campaign.

He clearly felt a radical rebuild was required this summer, but when it became obvious funds would be limited, opted to walk away rather than hold out for a compensation payment to cover the remaining three years of his deal.

“I pursued the services of David Moyes for a considerable period prior to his appointment last summer, which makes the announcement of his departure difficult for everyone concerned,” said Short.

“Having worked tirelessly throughout the campaign to avoid relegation from the Premier League, David has chosen to leave the club without compensation, which is testament to his character.

“In the days ahead we will take some time for reflection, and then focus on recruitment and pre-season as we prepare for our Championship campaign.  We wish David well in the future.”

Short has instructed Bain to turn his attention to the search for Moyes’ successor, although the Sunderland hierarchy will not be rushing into an appointment as they ponder their next move.

Former Black Cats striker Kevin Phillips has been installed as an early favourite for the post, having carved out a successful coaching career with Leicester City and Derby County since hanging up his boots.

Phillips worked under Nigel Pearson at the King Power Stadium, and it is conceivable the pair could work together again at the Stadium of Light.

Aitor Karanka is another leading contender, with the former Middlesbrough head coach desperate to remain in England following his exit from the Riverside in March.

Karanka, who has been linked with a possible move to Wolves, led Middlesbrough to promotion from the Championship last season, and boasts a strong track record in the second tier.

His defensive mind-set might not appeal to Sunderland’s fans though, and it is debatable whether he would agree to work within the strict financial restrictions that Short will impose.

The same is true of Garry Monk, who is stalling on signing a new contract at Leeds United, and David Wagner, who will be available if Huddersfield Town lose the Championship play-off final on Monday. Interestingly, both managers are understood to figure prominently on Steve Gibson’s shortlist as he ponders Steve Agnew’s future on Teesside.

Claudio Ranieri and Alan Pardew have also been mentioned as potential candidates, while Bain’s strong links with Rangers mean Alex McLeish is likely to come under consideration.

Where Moyes surfaces next remains to be seen, but having refused to acknowledge the Sunderland supporters at either Arsenal or Chelsea last week, he issued a brief statement last night thanking the club’s followers for their support.

“I would like to thank Ellis Short and the board for giving me the opportunity to manage Sunderland, and the fans for always being so passionately supportive of their club,” said Moyes. “I wish the players and my successor well in their efforts towards promotion back to the Premier League.”