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The Wales international was supposedly chasing a new five-year contract that would also see his wages rise.
The highly-rated midfielder is reportedly on a £4,000 a week deal at the moment, reflecting the fact that the contract had been negotiated before he broke into the first team at Upton Park.
New contract talks were triggered by the number of appearances Collison has made this season, and although the pay rise is understood to be an extra £2,000 a week, the club have opted against continuing with the talks, according to The Daily Telegraph.
The English-born Welsh international has made 22 appearances so far this season for the Hammers, scoring two goals in the process, and despite the lack of contract negotiations, the club will want to hold on to the player.
However, the financial situation at Upton Park has prompted new owners David Sullivan and David Gold to reassess the club's finances, and cost-cutting measures are having to be made.
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