The builder said several of its big sites were nearing completion and the release of final grants from the Housing and Communities Agency.

But it warned that the savage cuts in affordable housing budgets expected to be unveiled today had put it off buying similar sites for the time being.

The house builder said: “There are expected to be significant cuts in the future grant programme and the group is not acquiring any new sites where grant funding is a requirement of the scheme until the levels available in the future become more certain.

“Telford Homes’ record of delivery in its partnership with the HCA will give the group an excellent chance of securing future grant allocations,”

In a trading update, the firm warned that lower open market output as well as lower margins would reduce reported profits for a period of time, in line with management expectations.

It said: “The board remain cautious in their outlook in light of the uncertain economic environment and an expectation that the mortgage market will see little improvement before early 2012.

“Over time the increasing shortage of new homes will create further opportunities for significant growth and the long term prospects for Telford Homes remain strong,” the statement added.