Shares in Taylor Wimpey crashed on the London Stock Exchange yesterday after the UK's largest home builder said it had not been able to persuade investors to stump up more cash and jolted the City with a warning of further housing market weakness.

Shares in Taylor Wimpey crashed on the London Stock Exchange yesterday after the UK's largest home builder said it had not been able to persuade investors to stump up more cash and jolted the City with a warning of further housing market weakness.

The group had been in talks with shareholders to raise around £500m in fresh capital through a share placing. But it said that "in light of current market conditions," it has not been able to reach a satisfactory deal.

It also announced that it was closing 13 of its 39 regional offices, including two out of its five offices in Scotland. It has scrapped its interim dividend saying it will cut 900 jobs - 600 of them in the UK.

It said the move is expected to result in cost reductions of £45m per year, starting from the fourth quarter. It also confirmed plans to write down the value of its UK land bank and work in progress by £550m, or 11%, and its US landbank by around £70m.

Group finance director Peter Johnson will stand down at the end of 2008 and the firm will close offices in Glasgow and Aberdeen. It would not say how many jobs will be eliminated north of the border but sources said they could be between 75 and 100.

Shares in Taylor Wimpey ended the session down 25p to 35p, a loss of 41%, having shed as much as 58% shortly after the market opened. The stock has fallen more than 90% in the last year as housing markets have crumbled.

The group's announcement battered shares of other builders, with Barratt Developments slumping 37%, Persimmon dropping 16% and Bellway sliding 13%.

"The failure to raise fresh equity is a blow for both the group and the sector," Cazenove analysts said.

"Trading conditions have deteriorated at an alarming rate, and we will be reviewing our profit and dividend estimates across the sector."

Taylor Wimpey had said on Monday that it had agreed a deal to amend the terms of its banking facilities. The deal was intended to avert the risk it would breach banking covenants in early 2009, but was conditioned on the builder being able to raise additional equity.

Without new equity, the deal with banks could clearly fall through, though on a conference call chief executive Peter Redfern attempted to reassure investors, saying the group is still exploring capital options and that a deal to amend the banking facilities without adding equity could still be possible.

He added Taylor Wimpey still has time to hammer out a deal because it is not in urgent need of cash in the coming weeks.

"What's been particularly difficult to complete in the last few days is bringing in new investors," Redfern said.

"But we're not facing a brick wall in front of us," he added. "We haven't looked at anything like all the avenues that are out there."

In an update on current trading, the group said UK reservations have slumped 45% in the first half of the year and total completions were down by a third.

"We expect the UK housing market to remain weak through 2008 and we do not anticipate recovery in the short term," it said.

Taylor Wimpey, which also has operations in California and Florida, said US markets are still weak, with completions down 30% in the first half. It added that it does not expect to see any recovery until next year at the earliest.

A survey released shortly after the Taylor Wimpey announcement showed construction activity fell at its sharpest pace in at least 11 years in June, in one of the clearest signs yet of how falling house prices are hitting the wider economy.

The sector's travails brought on by plunging real estate values were apparent in the Chartered Institute of Purchasing and Supply's construction PMI which fell for the fourth straight month to 38.8 from 43.9 in May.

That was the weakest reading since the survey began in 1997. The housing sub-index was also the lowest ever, falling to 25.6 in June from 32.7. Any reading below 50 signifies contraction.

"The construction sector looks to be in for an extended, very difficult time," said Howard Archer, a senior economist at Global Insight. This adds to the serious problems currently facing the UK economy."