Sir David Murray says the Ibrox squad will be reduced in size

Rangers chairman Sir David Murray says a lack of European competition saw the club post a loss for the six months to 31 December 2008.

Figures published on Friday show a loss after tax of �3.9m compared to a retained profit of �2.3m last year.

Turnover also fell by �12.9m to �20.1m and Murray said the club had responded to the economic downturn.

"The squad size was neither sustainable from a financial nor football management point of view," he said.

Rangers manager Walter Smith had been told to reduce his squad from 28 to about 20, as the club look to reduce their �25m overdraft.

The club missed out on the financial windfall associated with Champions League qualification after losing to Kaunas in the qualifying round.

The players and management are committed and relish the challenges that lie ahead Sir David Murray

Murray said Rangers were coping well in the current climate and that they would continue to "rationalise the squad" and look to develop young talent through Murray Park.

Due to an increase in the average debt at Ibrox, the interest charge of �1.4m was �0.6m higher than for the same period last year, according to the figures.

"We are competing well again in both domestic cups, with participation assured in the final of the Co-operative Insurance Cup and progression into the quarter-finals of the Homecoming Scottish Cup," Murray said in a statement.

"The importance of Champions League qualification to the club underpins our determination to reclaim the Clydesdale Bank Premier League title and with it, direct entry into the Champions League group stages.

"The players and management are committed and relish the challenges that lie ahead, and I have no doubt that with your collective support we can achieve our objective of securing the league title and Champions League qualification for next year."

Rangers managed to trim the squad in the January transfer window by moving some fringe players, such as Alan Gow and Charlie Adam, out on loan.

However, attempts to boost the coffers by selling one of the club's top earners failed, with Birmingham City's bid for top goalscorer Kris Boyd stalling after the striker failed to agree personal terms with the Championship club.

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