Arsène Wenger has said it is essential that Arsenal secure Alex Oxlade-Chamberlain to a new contract because letting the 23-year-old leave would do “big damage” to the club.

Oxlade-Chamberlain is one of several Arsenal players whose contracts expire in the summer of 2018 but no significant progress has been made towards a new agreement with the England midfielder, Arsenal’s priority seemingly being to persuade Alex Sánchez and Mesut Özil to remain at the Emirates Stadium.

“I personally think it’s vital that Chamberlain stays at Arsenal,” Wenger said. “We bought him when he was very young and built him up. He has a great mentality and a good football brain and it would be big damage for us to lose this kind of player.”

With Aaron Ramsey, Kieran Gibbs and Jack Wilshere also approaching the final year of their existing deals, Wenger conceded that satisfying everyone’s demands this summer will be difficult but he expects a deal to be reached with Oxlade‑Chamberlain before the player enters the final six months of his contract and becomes entitled to enter negotiations with other clubs. “It will be done this year,” the manager said.

Wenger stressed he wants Arsenal to retain the club’s top young British players, as he believes a homegrown core to be an important quality to his squad.

“We have to keep them all. Ramsey, Chamberlain, Wilshere, Gibbs. All these players we have to make decisions and manage to keep them together,” he said.

Other Premier League clubs are monitoring the situations of those players, with Liverpool known to be among the admirers of Oxlade-Chamberlain, in particular. Wenger is adamant that Arsenal should hold on to the player for whom they paid £12m to Southampton in 2011, just before Oxlade-Chamberlain’s 18th birthday. Despite the manager’s declared fondness for him, Oxlade-Chamberlain is not a definite member of Wenger’s preferred starting lineup, with half of his 24 Premier League appearances so far this season being as a substitute. Even the player’s best position is unclear, although his most recent outings have been as a deep-lying central midfielder rather than as a winger.

Oxlade-Chamberlain performed badly in that position in the 3-1 defeat at West Bromwich Albion last month and then underwhelmed in the same role for England against Lithuania, and injury made him miss Arsenal’s past two matches, during which Mohamed Elneny and Granit Xhaka formed a strong partnership in central midfield. With the injured Santi Cazorla scheduled to return to action next season and Wilshere due to return on loan from Bournemouth, competition in central midfield is strong at Arsenal even before any potential summer recruits are factored in. All the same, Wenger says he foresees Oxlade-Chamberlain’s long-term future being in the middle and at Arsenal.

“That’s always what I’ve had in mind,” he said. “I’ve played him there a few years ago and I think he did well. He’s offensive and you can feel as well that he’s a guy who can get out of pressure because of his dribbling skill. And he has penetrating skills and in midfield that is important. I find as well that sometimes on the flank he is out of the way. In the middle he’s more focused, he needs to be involved in the game.”

Wenger admitted that Oxlade-Chamberlain needs to improve the defensive aspects of the role. “Because he has not enough experience in that position. He’s a player who likes to take the ball and go at people. He can lose balls but defensively he is strong in the challenge. He has that kind of robustness to deal with the body-to-body that is very important in the Premier League.”