Early signs of recovery are emerging across the UK housebuilding sector with new data pointing to increased activity at the start of the development pipeline and a renewed willingness among larger firms to deploy capital.
The latest Barclays Business Prosperity Index shows 83% of businesses operating in housebuilding and its supply chains are confident about their outlook for the year ahead, despite continued pressure from affordability constraints, regulation and elevated build costs.
Crucially for development lenders, Barclays’ anonymised client data indicates growing momentum in pre-construction stages.
Incoming cashflows rose by 2.3% among architects and by 4.8% among quantity surveyors between Q3 2024 and Q3 2025, suggesting more schemes are moving through feasibility, design and cost planning.
PROJECT PROGRESSION
Funding behaviour remains bifurcated. Smaller firms have reduced borrowing by 17.7% while increasing savings buffers by 3.0%, reflecting ongoing caution. In contrast, a smaller cohort of larger firms has increased borrowing by 20.0% and drawn down savings by 8.9%, signalling capital is being mobilised to progress projects.
Looking ahead, industry leaders plan to increase total investment by around 38% over the next 12 months, with notable uplifts in spending on marketing, new equipment and staff pay.
Skills shortages are accelerating investment in modern methods of construction, automation and AI, particularly to reduce labour intensity and improve delivery timelines.
RESILIENT NEW-BUILD
New-build demand remains resilient, especially among younger buyers. Almost half of first-time buyers who purchased in the past year opted for a new-build home, rising to 61% among Gen Z homeowners.
However, 61% of Gen Z prospective buyers say mortgage rates have a greater impact on affordability than house prices, reinforcing the importance of funding certainty and delivery speed.
ENCOURAGING SIGNS
Jason Constable, Head of Real Estate, Barclays Corporate Banking, says: “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.”
CONTINUED SUPPORT
John Ainsworth, Head of Real Estate, Barclays Business Banking, adds: “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.”
