Arsene Wenger will have to offload players this summer if he wants to make expensive buys because of Arsenal's financial situation, which was highlighted yesterday when the club announced six-month losses of £7.5 million after tax.

With Arsenal committed to a £400 million project for their new stadium, there is little money earmarked for transfers and the manager's juggling of resources will be further tested because the club have reiterated their determination to control the players' wage bill.

The first-team squad and management wage bill increased by £2.6 million over the six-month period to last November.

Savings will have to be made if the club are to offer significant pay rises to secure Patrick Vieira and Robert Pires on long-term contracts.

Pires called for reinforcements this week and wants to know the level of Arsenal's ambitions before he agrees an extended deal.

Wenger is not under pressure to sell but will have to offload, release or swap players to bring in costly signings.

Improvements to the defence and a new goalkeeper seem vital.

Wenger would happily sell the Nigerian forward Kanu, who barely features but is among the club's highest earners.

The manager must also decide whether to renew Dennis Bergkamp's contract or divert resources elsewhere. The futures of Ray Parlour and Francis Jeffers are uncertain.

Wenger faces a similar situation to last summer, when he spent £6.6 million on Gilberto Silva and Pascal Cygan and recouped almost £4.5 million by selling two goalkeepers, Richard Wright and Alex Manninger.

Although Arsenal's latest figures represent an improvement on the £12.6 million loss incurred during the comparative period in 2001, they demonstrate how far behind Manchester United the club lag in financial terms.

At the start of April, United announced pre-tax profits of £20.3 million in the six months to January 31st.

Arsenal are disadvantaged because Highbury's capacity is dwarfed by Old Trafford's and brings in far less gate money.

The club's proposed move to a 60,000-seat stadium has proved more costly than anticipated and the ground will not be ready on schedule for the start of the 2005-2006 season due to delays on a range of issues, including finance and transport infrastructure.

"Our new stadium project continues to play a significant role in current finances," said Arsenal's chairman Peter Hill-Wood, who stressed the need to keep a careful eye on wages.

"In our 2002 annual report, I referred to the control and potential future reduction of our player-wage bill and this remains an objective," he said.

"However, it is one we can only progress, in the light of market conditions, as new players arrive or existing contracts come up for renewal."

The club announced an increase in turnover of 28.5 per cent to £43.6 million and a slight rise in operating profits to one million pounds.

Net borrowing was significantly up at £28.3 million and Arsenal spent pounds £16.6 million on players during the period, including instalments on previously bought players.