CHIP HORNSBY, chief executive of the Wolseley building-supplies company, is part of a growing band of British company bosses who are constantly being asked the same question.

Exposed to the downturn in the American economy, and the weakening in the British housing market, Hornsby is well aware he faces challenges. What his investors want to know, however, is whether Wolseley will join the growing list of British companies that are asking shareholders for more cash.

“Wolseley can weather the storm without new equity, but that would mean it remains on the back foot until recovery is well under way,” said Hector Forsythe, an analyst at Evolution Securities. “It should consider an early equity issue.”

In the past month, British companies have revealed plans to raise more than £22 billion through share issues. The figure is the highest since records began, even allowing for inflation, according to research from HSBC.

Rights issues from Britain’s banks account for the bulk of that amount, but they have been joined by the likes of transport company First Group, engineering firm Balfour Beatty and Imperial Tobacco. There has been nothing like it since 1993, when £11 billion was raised through share issues to haul UK plc out of recession.

Analysts at Collins Stewart last week drew up a list of 39 companies they believe could join this round of fundraising or be forced into huge dividend cuts. The list included Britain’s biggest housebuilders, such as Barratt and Taylor Wimpey, along with high-street giants such as DSG, the electrical retailer, and WH Smith.

There is not even a recession, and already the cash calls have begun. If the rights issues continue, Britain’s fund managers may not have enough cash to fund them - which could send the stock market back into free fall.

“There are going to be more rights issues and fundraisings, that is certain,” said John Duffield, chairman of New Star Asset Management. “We all know that Barclays is going to have to do something, but others will, too – housebuilders possibly. If we do see another big wave of rights issues, that could have an impact on the market.”

The £12 billion rights issue unveiled by Royal Bank of Scotland last month was the biggest seen in Britain. The £4 billion cash call subsequently announced by HBOS, and the £5 billion rights issue revealed by Imperial Tobacco rank fourth and third respectively, according to data from Thomson Reuters.

A number of fund managers have been quietly preparing for a wave of cash calls, according to market sources. It is understood that Legal & General, which owns about 5% of the UK market through its tracker funds, has been squirrelling cash away in anticipation of such a move. L&G will have to cough up about £600m for the RBS rights issue alone. The move was designed to avoid forced selling of shares in the run-up to the rights issue.

If the worst-case scenarios hold true, this is only the start.

Collins Stewart’s list of 39 companies that could seek to raise capital was based on the level of “fixed charge cover” - a commonly used warning indicator that measures how well the operating profit of a company covers the interest on its debt and its lease payments.

Using this measure (which the analysts admit is only a rough guide) the top 10 companies to watch are: Bovis Homes, Taylor Wimpey, Redrow, Barratt, Signet, Wolseley, Wincanton, HMV, Regus and Findel. The pubs sector featured heavily in the rest of the list, with Marston's, Punch Taverns, Enterprise Inns and JD Wetherspoon all included.

That the top four companies are housebuilders is unsurprising - it is one of the sectors that is suffering most and where conditions are expected to get worse. House prices are falling and the credit crunch means people are finding it harder to get mortgages.

Most of the other companies flagged up are exposed to consumer spending, such as Findel, the home shopping group, and Signet, the jewellery retailer.

A number of companies - including Wolseley and Barratt - have already said they will not have rights issues and will tackle their problems through other means. But investors no longer believe chief executives, following u-turns on fundraising from the likes of Sir Fred Goodwin at RBS and Steven Crawshaw at Bradford & Bingley.

Many analysts already assume that most of these companies will raise new capital in their forecasts for this year’s financial results. Others think that raising capital would be prudent to help their businesses through the downturn.

“Investors are less willing to allow companies to run with highly leveraged balance sheets and are more accepting of rights issues,” said one senior UK equity strategist. “Companies are realising this. Balfour Beatty and First Group are great examples of this - neither needed to do rights issues.”

There is cash in the system, but only so much. The latest Merrill Lynch fund-manager survey indicated that more than 40% of Britain’s fund managers had an “overweight” cash position.

Since the start of the year 12 takeover deals have been completed, including Scottish & Newcastle, Reuters, Resolution and Kelda. That has led to £21 billion flowing into UK equity funds – a figure that matches the amount that is now to be ploughed into rights issues.

However, analysts still believe that Barclays alone could ultimately tap the market for as much as £10 billion. It isn’t clear where all that money would come from.

“There is still cash from big takeovers like Scottish & Newcastle that hasn’t been spent,” said Stuart Fowler, senior equities fund manager at Axa Investment Managers. “This time of year is also big for dividend cheques coming in from all the companies with a December year-end, so I don’t think this round of rights issues will be a problem. If you were to ask me again in six months, when we will probably have seen a lot more rights issues, then it could be a different story.”

Graham Ashby, head of income funds at Credit Suisse, said: “There has already been a big move into cash by fund managers that began last year. The question is whether fund managers decide they want to put that cash back to work in the markets by taking up their rights.”

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