Scunthorpe chairman Steve Wharton believes Southampton have withdrawn their offer to Nigel Adkins to fill the vacant managerial position at St Mary's.
Adkins, 45, who has steered the Iron to two promotions in four years on a shoestring budget, had emerged as the man the Saints want to replace Alan Pardew, who was sacked on August 30.
Assistant manager Andy Crosby was expected to follow Adkins to St Mary's but the two clubs have failed to agree a compensation package.
And Wharton said "The latest I've heard is that Southampton have withdrawn their offer to Nigel."
He added: "They gave him an ultimatum to resign from his position as Scunthorpe United manager, but he was not prepared to do that until a compensation package had been agreed.
"I'm on my way to Glanford Park this morning and hopefully everything will then become clearer."
Adkins has spent the past 14 years at Scunthorpe, working for a decade as the club's physiotherapist and spending the last four as manager.
His ambition looked set to be matched when the Southampton vacancy arose but it now seems increasingly unlikely that he will take up the position.
His refusal to walk out of Glanford Park without compensation having been agreed underlined his loyalty to the club and raised the prospect of him remaining at the helm for Saturday's home clash with Bristol City.
Phil Brown, who has been out of work since leaving Hull, would now appear to be favourite to land the job at Southampton.
Copyright (c) PA Sport 2009, All Rights Reserved.
Do YOU want to write for GiveMeSport? Get started today by signing-up and submitting an article HERE: https://www.givemesport.com/writeforgms