Two days later, an estimated 11,000 came to Layer Road to witness a 3–3 draw in the first meeting between Colchester United and nearby rivals Ipswich Town.

Reg Smith was sold to Wolverhampton Wanderers in October 1937 for £250, and with a deal agreed for Cliff Fairchild to join Arsenal at the end of the season for £500, Davis used his entrepreneurial skills to arrange for both First Division clubs to contest the Colchester Challenge Cup at Layer Road.

With the Oysters suffering financial difficulty, the amateur club folded in 1937, having joined the six-club Essex Senior League.

The club re-emerged briefly in January 1938 to complete an Essex Senior Cup tie in order to avoid a fine, but the withdrawal of Town meant that United could enter a reserve side into the Eastern Counties League one month later, with the reserve squad boosted by many of those previously on the books with Colchester Town.

The return match with Ipswich saw 8,000 Colchester fans set a new Portman Road ground record attendance of 23,890, with United wearing a new orange and black away strip.

They lost the first leg 2–1 at Yeovil, but triumphed 3–1 at Layer Road to win 4–3 on aggregate and secure the club's first ever trophy.