FEARS are growing about the future of Worcester’s flagship regeneration project at Diglis after the construction firm behind it revealed massive losses.

Housebuilder Taylor Wimpey said yesterday sales of its new homes fell by almost one third across the country during the first half of 2008, while its house prices dropped by about 10 per cent.

The firm has racked up pre-tax losses of more than £1.5 billion after being forced to write-off nearly £600 million from the value of the land and property it owns in Britain, due to plunging prices.

Taylor Wimpey is the UK’s biggest housebuilder and the owner of Bryant Homes, which is halfway through building the 450-home canalside development at Diglis, Worcester, complete with offices, restaurants and a gymnasium. In May, Bryant revealed it plans to “re-evaluate” the final two phases of the Diglis project – the area overlooking the canal basin and bridge – because of a slowdown in sales.

Yesterday, Taylor Wimpey refused to comment on the future of any specific development, but said it would be tightly controlling its spending on current projects.

A spokesman said: “Our focus remains on preserving value through maintaining a steady but reduced sales rate, and controlling land and work-in-progress spend tightly. As such, we continue to evaluate our existing and future site programme on the basis of local market conditions.”

Taylor Woodrow won approval for the massive development at Diglis in 2004, after more than 10 years of negotiations between developers and city planners.

Work is well underway, with more than half the 215 homes in the L-shaped block overlooking the basin already snapped up by buyers. But the firm now has debts of more than £1.7 billion following its merger last summer with fellow housebuilding company George Wimpey.

And its underlying profits have nosedived by 96 per cent to just £4.3 million after what chief executive Pete Redfern called the “very challenging conditions of the first half of the year”.

Mr Redfern said the firm has resorted to offering incentives to buyers such as paying their stamp duty and legal fees, as well as supplying free carpets.

He said: “We are actively driving sales, and our margins are coming under pressure. Our prices will be under pressure too. We are gearing up our business to run through difficult conditions for a while."