The club sold nine first-team players in the off-season and Davies resigned on 18 September 2001 after poor form saw Motherwell gain just 3 points from seven matches at the start of the 2001–02 season.

[5][6] Davies moved south to England and took on the role of assistant manager to former Scotland national coach Craig Brown at Preston North End.

Despite a difficult start to the 2005–06 season, a 25-game unbeaten run meant Preston went on to qualify for the play-offs for a second successive season although the side again failed to win promotion as they were knocked out by Leeds United after losing the semi-final second leg, after he famously left Elland Road following the first leg issuing the quote "Job Done" to the media, only to lose at home and be knocked out.

He was interviewed for the position at Charlton Athletic when it was announced that Alan Curbishley would be stepping down after 15 years as manager but Davies was unsuccessful and the job went to Iain Dowie instead.

[11] In Davies's first season as Derby manager he led them to third place in the league and won the play-offs after defeating Southampton in the semi-finals and then West Bromwich Albion at Wembley Stadium, ending Derby's five-year absence from the top flight – the scorer of the winning goal, Stephen Pearson, was a former youth player from Davies's time at Motherwell.

After criticising Derby's board for lack of investment, Davies left Pride Park by mutual consent on 26 November 2007 with the club bottom of the league.

[22] Davies was nominated for the manager of the month award for October after guiding Forest to three successive wins and a draw, but he missed out to Dave Jones of Cardiff City.

[33] After an eight-game winless run left Nottingham Forest one place and two points outside of the play-off positions, and having seen his side lose 5–0 to local rivals Derby County two days earlier, Davies was dismissed on 24 March 2014.

"[34][35] Louise Taylor of The Guardian pointed to Davies' "paranoia", "self-destructive insecurities" and "obsession with conspiracy theories and old grudges" as the reasons behind his downfall, suggesting that he had "shattered" his reputation.

[38] As of August 2023, Davies' role at Nottingham Forest remains his most recent;[9] an interview for the position at Heart of Midlothian in 2017 did not lead to an offer.