Jermaine Pennant has agreed to sign a permanent deal with Birmingham City and is today expected to tie himself to the club until the summer of 2008.

The Arsenal winger has been a revelation since joining Birmingham on loan in January and now, having served a prison sentence last month for driving offences, has taken another significant step towards reviving his career.

It also has the potential to be one of the most important in Birmingham's history.

Pennant, who produced a superlative performance in Birmingham's 1-1 draw away to Everton two days ago, made 12 Premiership appearances in five years for Arsenal. Steve Bruce, the Birmingham manager, has tipped him to play for England.

It was always unlikely that Pennant, aged 22, would remain with Arsenal and I understand that the sticking point was that he wanted to sign a three-year deal, whereas Birmingham wanted a four-year deal.

Birmingham had already agreed a £3 million fee with Arsenal and, given Pennant's talent, it will be widely regarded as good business by the club.

Bruce met representatives of Pennant yesterday and is believed to have been happy with the progress made. Pennant, meanwhile, has been impressed with how Birmingham have looked after him before, during and after the spell in prison.

David Gold, the Birmingham chairman, has made no secret that signing Pennant has been a priority for the club and now his patience has been rewarded. Pennant cannot officially become a Birmingham player until July 1 and so will remain on loan until the end of the season.

Born in Nottingham in January 1983, Pennant played for Notts County for one season - 1998-99 - before joining Arsenal. However, incidents in his private life did not impress Arsenal and, eager to give him firstteam experience, they sent him out on loan to Watford and Leeds United.

He moved to Birmingham on loan on January 31, played four matches before his spell in jail and has played five matches since.

He has already forged a useful partnership with Mario Melchiot on the right flank and has helped to bring out the best in Emile Heskey, the England international striker, who scored Birmingham's goal against Everton.

Bruce confirmed on Saturday that Pennant was close to signing a deal with Birmingham. What the manager did not say was that he would subsequently spend much of yesterday concluding the transfer.

It was clear against Everton why Pennant will be such an integral part of Birmingham's team. His silky skills and pin-point crossing make him a useful outlet on the right wing.

Contrary to perceptions, however, Pennant does not hail from a rough part of Nottingham. Indeed, his family background is stable. What separates him from the average Premiership player is that he has sometimes been negligent in his choice of acquaintances.

Still, in this form, it is easy to see why Birmingham are so keen to take a risk in signing him. Birmingham played well, deserved to win, but had to settle for a draw when Duncan Ferguson equalised in the 86th minute. Bruce was a study of disappointment afterwards.

But there was much about which Bruce could be pleased. In addition to the performances of Pennant and Melchiot, there was another encouraging performance by Heskey.

The striker has not been afforded the luxury of a regular partner but he looks a player of international class. He did more than score an important goal.

"Emile has led from the front for us for nine months and it has been a difficult season in many ways," Bruce said. "But Emile has led the line superbly. He has not had a settled partner but just got on with it.

"He has got back into the England frame and anyone who plays against him - you just ask the two Everton centre halves - know they are facing a real handful of a player."

In spite of Birmingham's fine display, Bruce was disappointed with the result and with the failure of his team to grasp the killer instinct.

"I felt we were the better team and deserved to be ahead and when Mehdi [ Nafti] missed that chance it should have been all over," Bruce said. "Two ahead then and the game was finished.

"We were stung by a lot of the criticism we received after losing [3-0] at Manchester City in midweek and I felt the boys answered that and deserved to win.

"They got their goal in the final minutes with the ball bouncing all around the area before they scored. That just about sums up the situation. Everything seems to be going Everton's way at the moment and we cannot quite get the rewards we deserve."