Neville told Sky Sports News that the deficit is too big to make up, and that Man United will be unable to defend their Premier League title this season.
He said: "They have performed well below the standards that are expected of them and well below the standards that they are capable of.
"When you think that this team were champions only a few months ago, it's a sharp decline, but they're capable of getting back to a good standard.
"I think the title will be far too difficult for them this season. They will need to get back up into those Champions League positions and get back to playing the way that we know they can."
United travel to Aston Villa this afternoon and will be looking for their first league win since November 10, when they beat Arsenal 1-0.
You can follow live minute-by-minute text commentary of this afternoon's game from Villa Park here.