Barratt Developments, the troubled building group, yesterday reported a 43% drop in sales of private homes in the first half of the calendar year, but said it has renegotiated loan terms and a £400m credit line to help it cope with the worst housing slump in 15 years.

The company also confirmed, as reported in The Herald last week, that it plans to lay off 1200 employees and merge Aberdeen-based Barratt North Scotland with the firm's Edinburgh office. The company also scrapped plans to pay a final dividend.

Barratt, the fifth major UK homebuilder this month to report a drastic drop in demand, said total completions, which include social housing, fell 13.8% in the year ending June 30 on a like-for-like basis, with private completions down 18.4%.

The like-for-like figures include comparisons for Wilson Bowden, which Barratt acquired in April 2007.

Average private sales rates in the second half, at 211 per week, were 13.5 a week less than in the June-December period.

The UK's housing industry has been hit hard by the impact of the credit crisis, which has prompted banks to offer fewer mortgages on less generous terms.

"Despite the substantial reduction in sales, visitor rates per site per week were down only 14.8% in the second half on the prior year and up 15% on the first half, reflecting underlying consumer demand," the company said in a trading update.

"This mismatch between visitor levels and sales, and the level of cancellation rates, which rose to 33.6% for the full year, reflects the acute shortage of mortgage finance."

The widespread slump in housing has soured Newcastle-based Barratt's £2bn purchase of Wilson Bowden, and City analysts said the company faced the prospect of defaulting on loan terms if banks had not agreed to relax borrowing requirements. "The group continues to operate within its committed facilities and its current banking covenants," Barratt said. "However, it is possible to anticipate market conditions where this may not continue to be the case."

Lenders and private bond holders have agreed in principle to exchange a covenant based on earnings in relation to interest payments with one based on cashflow. They also eased another linked to the company's debt-to-asset ratio.

Shares in Barratt, the UK's worst-performing homebuilding stock this year, rose on the news that the group renegotiated loan terms and a credit line. The stock closed 13p stronger at 67p - a gain on the day of 24%.

Cazenove analysts said news of the new financing "will steady some nerves. However, the forward order book has fallen by 50% year-on-year and the group remains extremely operationally and financially geared."

House builders' share prices have collapsed this year, partly on fears of big writedowns on land bought at the peak of the housing market.

A 10-year boom in the housing market began slowing last summer before the global credit crunch choked off the supply of cheap and easy money that had helped to triple prices in a decade. Job losses across the construction sector are expected to reach 10,000, according to industry sources, with many companies letting go 40% of their staff.

Traders said vulture funds are circling UK housebuilders, as their debt and equity prices plunge, hoping for rich pickings.

The funds, which look for profit in distressed assets, have been attracted by prices as low as 20p in the pound for the debt of some of the well-known housebuilders, a City trader stated.

Elsewhere in the sector, the downturn in UK residential construction, and a contraction in the United States, forced Austria's Wienerberger, the world's largest brick-maker, to issue a profit warning yesterday.

Wienerberger said earnings would fall this year as residential construction in the UK "collapsed" and US building fell sharper than expected, sending its shares down as much as 23%.

He said business started to worsen in the second quarter, leading to a fall in quarterly revenues and a 10% drop in core earnings for the first six months of the year.

Credit Suisse warned just before Wienerberger's statement that it expected more building materials makers to cut forecasts. It named Saint-Gobain, Italcementi andHolcim as the most likely to warn on profits. French-owned Saint-Gobain and Swiss-based Holcim have significant operations in Britain.