Housing developers are preparing to fight a government demand to spend billions of pounds on cladding repair costs after Michael Gove threatened to block the industry from building new properties.

Major housebuilders plan to hire a Big Four accounting firm to examine whether the Levelling Up Secretary’s £4bn price tag for a cladding compensation scheme is too high. Their trade body, the Home Builders Federation (HBF), is also set to instruct external lawyers so it is ready to take legal action.

Mr Gove sparked fury in the industry at a meeting on Thursday when he threatened to withhold planning permission for new developments unless big housebuilders agreed to pay up by early March.

One developer told The Telegraph that the policy would trigger “judicial review after judicial review” if implemented.

An appeal by the HBF for Mr Gove to work with the industry appears to have fallen on deaf ears.

The federation wrote to him on Tuesday calling for cooler rhetoric, and warned that failure to compromise could mean fewer homes are built, in a blow to efforts to tackle the housing crisis.

Its letter claimed that housebuilders have pledged at least £1bn to fix their own buildings and that an existing cladding tax will raise more money than Government forecasts suggest.

The HBF said: “While we all understand that criticism of developers plays well in the media and in Parliament, extreme language about the sector as a whole and general anti-business sentiment undermines efforts that many builders and their highly committed colleagues are making to resolving remediation projects.”

Mr Gove has made it his priority to resolve the cladding crisis, in which 274,000 properties were found to contain unsafe building materials after the Grenfell fire.

In 2020, a £5bn fund was set up for people who live in buildings over 18 metres tall to get a grant to remove cladding. This is partially funded by a tax on the industry.

However, people living in buildings between 11 metres and 18 metres tall are not covered by this scheme. Until now, they have been forced to take out a low-interest loan at a typical cost of tens of thousands of pounds in debt.

Mr Gove has said that the industry should be forced to pay for cladding to be removed from these properties instead. He said on Thursday that if the industry does not co-operate, he will use ministerial powers to prevent new developments from going ahead.

Housebuilders believe it would be impossible to blacklist companies from planning permission on safety grounds, as all buildings were constructed according to government regulations at the time.

Potential legal arguments are being prepared if Gove continues to threaten a planning permission veto, which is regarded as a nuclear option if talks fail.

Housebuilders are also consulting major accountancy and consulting firms about alternate projections of expected costs, having labelled the numbers “baseless” at Thursday’s meetings.

Responding to the move, a government source said: “It’s time for developers to focus on leaseholders, not litigation”.