The company behind an £8 billion project to build the world’s biggest offshore wind farm in British waters said it will be put on hold unless the government offers tax breaks to offset soaring costs.

Orsted, the renewable energy company majority-owned by the Danish government, said sharp rises in construction and financing costs meant it was no longer viable to build Hornsea Three on the terms agreed with the government last summer, reports The Times.

The wind farm, about 75 miles off the coast of Norfolk, would have a capacity of 2.9 gigawatts would generate enough electricity to supply more than two million homes.

It is due to begin production in 2026 and is critical to the government’s goal of generating 50GW of offshore wind by 2030 to boost energy security and cut emissions.

Duncan Clark, head of Orsted UK, said that if the government did not intervene by the end of April, “the project would have to go on hold” and the company would cancel reservations with companies in its supply chain.

Vattenfall, the Swedish group developing another of the projects that won contracts last summer, has also said that it is “vital” for the government to offer “enhanced capital allowances” in the budget.

A UK government source said the inflation-linked contract was already generous but it was “open to listening to the sector about concerns they may have”.