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Troubled Swan has told staff it is closing its two offsite factories as efforts to complete its delayed rescue merger with Sanctuary continue.

The 11,000-home housing association has decided to shut the facilities after last year losing control of development costs and breaching a regulatory standard.

It has now told staff in a letter that it would not be 鈥榝inancial sustainable鈥� to keep the factories open even after its expected deal with 105,000-home rival Sanctuary is completed.

The Essex-based firm opened a cross laminated timber factory in 2017 in Basildon and last year fitted out a second factory to build steel-framed modular homes directly opposite it, which it said would allow Swan to build 1,000 homes a year. The organisation had been planning to build 10,000 homes in total by 2027.

But staff were told in an email last week: 鈥淚t has not been a decision that we have made easily or lightly.

鈥淗owever, it is simply not financially sustainable for Swan to continue to construct homes in this modular way, with Swan鈥檚 factory having been running at a loss.

鈥淲e must take steps to minimise our risk to ensure we can continue to deliver services to our customers and communities.鈥�

Meanwhile, funder M&G Trustee Company has issued a statement saying it will not issue a default notice to Swan despite it failing to complete its rescue deal with Sanctuary by 30 November as expected due to lender consents not being in place.

In October it emerged Swan had breached loan covenants by not delivering its audited accounts to M&G on time.

But funder M&G said at the time it would not take any action in response on the basis the merger was completed by the end of last month.

In a fresh update on Friday, M&G said the merger discussions were still ongoing and the deal has been approved by the boards, while Swan is talking to auditors to finalise the accounts.

The M&G statement said: 鈥淢&G is not aware of any adverse developments that would cause it to reassess its position.鈥�

The saga surrounding Swan began last year when the Regulator of Social Housing found it to be non-compliant with its governance and financial viability standard after losing control of its development programme costs.

>>See also: Can housing associations keep development going as the rest of the market slows?

>>See also: Why are we struggling to make modular work?

Swan, which had invested significantly in modern methods of construction, initially went into discussions with Orbit regarding a merger before talks broke down following due diligence.

In October as the loan covenant breaches emerged, it also came to light that Swan only held enough cash to last until early December, although it has since negotiated a 拢50m loan with Sanctuary.