Manager Ted Davis strengthened his squad with League football very much on the agenda. The public responded as the opening fixture of 1938-39 against Gillingham attracted 8,142 and a week later 10,129 watched the Southern League visit from Arsenal 'A'. In October 1938, Layer Road hosted the Southern League versus the Cheshire League representative match. Alec Cheyne and Len Astill were selected from Colchester and Cheyne scored as the southerners ran out 4-1 victors.
Another 4-1 success heralded United's first venture into the FA Cup. Defeating Ilford at Layer Road before 8,160 supporters they bowed out to Folkestone in the First Round Proper.
A number of United's players belonged to Football League clubs in terms of contract. Davis had snapped up a host of experienced players and while they could freely play non-League for Colchester most had a 'price on their head' owing to their contracted club should another League club wish to engage them. With this in mind, Davis urged caution when the Colchester Board began discussing applying for membership of the Football League. Had United made the step up then they too would have been liable for the transfer fees or face losing a large part of the squad.
United had had a very successful second season. They claimed the Southern League championship scoring 110 goals in 44 games, finished runners up in the Midweek section and reached the Southern League Cup semi-finals. Time ran out to play the semi-finals and it was agreed to play them the following campaign.
Once again goals were not a problem. Pritchard netted 43 times, while George Wallis scored 24 and Cheyne and Astill helped themselves to 21 apiece from United's 161 grand total.
With high hopes that United would be elected to the Football League, director Walter Clark presented United's case to the Football League members on 23 May 1938. Colchester did not receive a single vote in their favour and this was put down to the fact that they had so many League-registered players on their books of whom Davis had, in effect, poached to play for Colchester.
The ownership of Layer Road was passed to the Borough Council with Chairman Maurice Pye declaring: "Every lover of football, will I'm sure, welcome this as a move in the right direction, for whatever happens this fine open space will always belong to the town, and be for the benefit of Colcestrians and their love of football."