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The Blues got off to the worst possible start, conceding twice inside the opening 10 minutes, and never really recovered from that early setback.
Bukayo Saka opened the Gunners account on four minutes before Robbie Burton then doubled the hosts’ advantage, converting a ninth minute penalty.
Winger Jayden Braaf nearly narrowed the deficit after breaking in behind the Arsenal defence only for Gunners keeper Deyan Iliev to deny him.
And the half ended on a low for the Blues with Joe Willock claiming a third for the hosts.
City provided an immediate response at the start of the second half with Luke Bolton striking from close range after two fine Iliev saves.
However, Arsenal responded with a fourth - and a second for Saka on 51 minutes - and a tough night for the Blues was compounded when Xavier Amaechi struck for a fifth time for the Gunners on 66 minutes.
Curtis Anderson was in goal with Jeremie Frimpong, Eric Garcia, Phillipe Sandler and Nathanael Ogbeta forming the back four. Claudio Gomes, Taylor Richards and Felix Nmecha comprised our midfield with Benjamin Garre and Jayden Braaf out wide and Luke Bolton operating as the spearhead.
The result saw Arsenal leapfrog above City into seventh in the Premier League 2 table with City dropping to eighth, with 20 points from 15 games.
Our EDS squad are back in action next week when we travel to Sunderland for our Checkatrade Trophy quarter-final.
Date and kick-off time to be confirmed.
Checkatrade Trophy Quarter-Final draw details
Under-21s striker Luke Bolton looks ahead to the prospect of City's Checkatrade Trophy quarter-final
Manchester City EDS manager Paul Harsley gives his verdict on dramatic Checkatrade Trophy victory away at Rochdale