The UK housebuilding sector is showing early signs of recovery, with firms reporting strengthening activity at the front end of the development pipeline and a sharp increase in planned investment, the latest Barclays Business Prosperity Index reveals.
The report, drawing on anonymised data from around 70,000 UK businesses alongside surveys of industry leaders and consumers, found that 83% of companies operating in housebuilding and its supply chains are confident about their outlook for the year ahead, despite ongoing affordability pressures, regulatory demands and cost challenges.
Architects saw incoming cashflows rise by 2.3% between Q3 2024 and Q3 2025, while quantity surveyors recorded a 4.8% increase, signalling renewed momentum in project planning and design.
Smaller firms remain cautious, cutting borrowing by 17.7% and increasing savings by 3.0%, while a smaller cohort of larger firms has increased borrowing by 20.0% and drawn down savings, suggesting capital is beginning to be deployed.
INVESTMENT BOOST
Looking ahead, industry leaders plan to lift total investment by around 38% over the next 12 months, with spending increases targeted at marketing, new equipment and higher pay to attract talent.
Skills shortages are driving greater adoption of modern construction methods and technology, including automation and artificial intelligence, as firms look to boost productivity and reduce reliance on manual labour.
Demand for new-build homes remains resilient, particularly among younger buyers. Almost half of first-time buyers who purchased in the past year opted for a new-build property, rising to 61% among Gen Z homeowners.
However, affordability remains a constraint, with 61% of Gen Z prospective buyers saying mortgage rates have a greater impact on affordability than house prices.
ENCOURAGING INNOVATION
Jason Constable, Head of Real Estate, Barclays Corporate Banking, said: “The level of innovation we’re seeing across the industry from larger developers to specialist trades is encouraging, with businesses investing in technology, skills and modern construction methods to boost productivity.
“These innovations, combined with stronger consumer demand for new-builds, present a significant opportunity for housebuilders. While affordability and planning delays still pose challenges, the underlying strength of demand points to clear potential for growth as market conditions stabilise.”
SUBDUED ACTIVITY
John Ainsworth, Head of Real Estate, Barclays Business Banking, added: “Activity is generally subdued among SME housebuilders, with nearly three in 10 expecting no increase in output in the year ahead.
“Yet SMEs are working hard to overcome skills shortages and regulatory alignment, with their resilience coming through strongly as they show confidence in their future success.
“If the industry is to hit the Government’s target and build the much-needed homes of the future, it’s vital we continue to support the scaleup of smaller regional players.”
