Taylor Wimpey today admitted that it has been unable to secure nearly £500 million in funding from investors, putting Britain's largest house builder at risk of breaching its banking covenants.

Shares in the company plunged 46.25 per cent to 32.25p after it blamed "current market conditions" for its failure to raise new capital.

Peter Redfern, chief executive at Taylor Wimpey, said the company had managed to secure a proportion of the capital from its existing shareholders, but was unable to raise the remaining sum from new investors "within a short period of time".

Mr Redfern said the company would pursue its existing strategy of tapping investors for money, but admitted it he was not ruling other methods of raising capital, including a rights issue.

Taylor Wimpey said that if it is unable to raise new capital it may breach it banking covenants next year.

The company announced on Monday that its banks had agreed to amend its loan agreements.

But it emerged this morning that Taylor Wimpey's banks will only change the company's covenants if it manages to raise new funding. If not, the group's existing loan agreement still applies.

Taylor Wimpey said today: "We remain in full compliance with our banking covenants.

"However, without an amendment to the terms of our banking facilities, in certain negative market scenarios we might breach one or more banking covenants at the first testing date in 2009."

Dresdner Kleinwort, the investment bank, said today: "We believe there is a very real danger that Britain’s biggest housebuilder by volume faces collapse.”

Taylor Wimpey currently holds £1.7 billion worth of debt which it expects to fall to £1.4 billion by December. It currently has £100 million cash in the bank and £800 million headroom left on its credit facility.

The company also confirmed today that it will lay off 900 of its staff and its finance director, Peter Johnson, is stepping down after five years. Mr Redfern said that Mr Johnson's departure was not connected to the capital raising, and declined to give details of any pay-off the finance director might receive.

But Mr Redfern did say Mr Johnson, who was paid a total £807,000 last year, will not receive a "special deal or any of that".

Taylor Wimpey has also decided not to pay a dividend this year, meaning investors will not receive an interim payment.

On Monday, Taylor Wimpey had confirmed that it was meeting with existing and new investors to raise further capital. However, the company said today: "...in the light of current market conditions we have not been able to conclude a satisfactory transaction."

It is understood that the builder's biggest investors - Alliance Bernstein, Toscafund Asset Management, Standard Life, Barclays, Legal & General and M&G - had been approached to put up nearly £500 million in capital.

The Sunday Times reported that the investors, that account for 25 per cent of the company, had been broadly supportive but had not agreed on a price for the deal that is being co-ordinated by UBS and JP Morgan Cazenove.

Taylor Wimpey was also negative about future trading. It said: "We expect that the UK housing market will remain weak at least through 2008 and we do not anticipate any recovery in the short-term."

The company said that the spring selling season "has been severely impacted by the continued constrained mortgage market and by worsening consumer confidence" and it has written down a total £660 million.

Reservation levels for houses plunged by 45 per cent in 26 weeks to June 29 while the rate of cancellations rose from 19 per cent to 29 per cent over the same period.

At the same time, the number of housing completions slumped by a third compared to last year and Taylor Wimpey's order book fell by 33 per cent, with average priced for a new home 8 per cent lower.

Times Recommends

• Toyota recalls 437,000 cars including Lexus
• Myners says bonuses are bleeding pension funds
• Japanese company faked safety reports on seats