MAJOR North-East housing developments are in limbo and contractors face an uncertain future following the collapse of construction firm Southdale.

Workers have downed tools on two building sites in North Yorkshire – where a combined 1,000 homes are planned - as developer Mulberry Homes tries to find a builder willing to replace Southdale, which went bust last week with the loss of 30 jobs at its County Durham offices.

Construction company Kier has taken on some of Southdale’s staff and building projects in the North West, but no decision has been made on any of the collapsed firm’s unfinished sites in North Yorkshire and the North-East.

It leaves the controversial 925-home Sowerby Gateway housing development, south-west of Thirsk, and the 82-home Leeming Gate site, in limbo.

Southdale schemes across Tyneside are similarly affected.

Mulberry Homes Yorkshire, part-owned by Broadacres Housing Association, sought to reassure residents and house buyers that efforts were being made to rescue the North Yorkshire projects.

A spokesperson told The Northern Echo: “We can confirm that as a result of Southdale going into administration, work has temporarily stopped on our schemes at The Oaks, Sowerby, and Leeming Gate, Leeming Bar, but any homes that were near to completion will be delivered by local contractors as per the schedule.

“We have entered into discussions with the administrator and alternative contractors, and we are keeping all our future options open at this time. Whilst there will inevitably be a short delay to the building programme, we expect work to restart on site very soon.”

Both developments have drawn criticism from residents.

Protesters against Sowerby Gateway were concerned that the area's transport links could not cope with such a large scheme. And last November, Mulberry were challenged by angry residents and councillors to deal with a mound of what they claim was contaminated waste on part of the site, dug out of an old foundry tip and dumped close to homes and a school.

Last week, administrators handed redundancies to about 30 staff at Southdale’s offices on Aycliffe Business park, Newton Aycliffe, after the builder succumbed to a cash crisis. It led John Dickson, chairman of North-East builder Owen Pugh to warn of knock-on effects across the regional supply chain.

Southdale’s sudden collapse has drawn comparisons with GB Group construction which entered administration last month, leaving debts that dragged other suppliers into jeopardy.

Chris Dancer, chairman of the Civil Engineering Contractors' Association (North East), warned about the vulnerable condition of the region’s building trade when he said: “There is no doubt that the sector has improved for the North-East over the last couple of years. However the recent news shows that recovery in the North-East very much remains in a fragile state.

“Many construction companies are experiencing growth in their order books, but cost increase pressures and cashflow risks created by situations such as these, create hesitation when planning recruitment and investment.

“While a number of planned projects have stalled awaiting the General Election outcome, it is hoped that as long as a credible government is established and the prospect of a subsequent second general election does not materialise, then positive vibes will return to the sector.”

Asked why firms were going out of business amid signs of economic recovery, Mr Dancer told The Northern Echo: “A number of construction firms - particularly the larger ones - have become victims of fixed price, high-risk, longer-term contractual arrangements.

“Such arrangements were taken on board during the recession when margins were non existent.

“The chickens have come home to roost for some of these firms as costs have increased, putting them into heavy losses and eventually seeing them run out of cash.

“Unfortunately, the collapses will resonate throughout the supply chain as suppliers and sub contractors alike will be having to write off debts.

"Those sub contractors who are just about seeing a revival at long last could well do without this problem and I suspect we haven’t heard the end of it just yet.”