New Build Contracts?

Unfortunately in England a house purchase or sale can fall through at anytime until exchange of contracts.

As far as I know, one party cannot unilaterally change the terms of a contract – both parties have to agree. An exception might be if they have some sort of ‘get out’ clause, like force majeure or other provision regarding the additional works proposed.
However, if they have given you the option of cancelling the contract, you may wish to do that, especially if trust has been lost. Or, you could always volunteer to sign a new contract at a lower figure excluding the works (maybe lower market price too?). Provided it is a sensible offer, I’d be surprised if they refuse.

In property law there’s no contract until you’ve exchanged, so yes, they can. It sounds as if the salesman may have been winging it, hoping the developer might agree or you’d compromise. If the developer isn’t interested they’d probably do it badly anyway.
Salesman still needs his commission so there might be an opportunity. Quickly find out how much your changes will cost and decide your maximum. Make an offer to the same salesman. If there’s a compromise, the salesman may find it, but unless the property is worth the original price to you, be prepared to walk away.

you mentioned you signed a contract. what type of contract was this? have you paid a deposit or fee with this contract.

i would expect that if there is a contract, an offer, an acceptance and consideration the contract is valid and the seller is in breach.

however the previous comments do have some merit. ultimately it is down to how much you want the house and how hard you want to negotiate/fight for what you have agreed

good luck!