Barclays: Housebuilders step up investment as confidence holds firm

Four in five businesses (83%) linked to housebuilding and its supply chains remain optimistic about the next 12 months, despite affordability constraints, regulatory demands and a cautious funding environment, according to the latest Barclays Business Prosperity Index.

Drawing on anonymised data from about 70,000 UK business clients, together with responses from 500 industry leaders and 2,000 consumers, the index suggests that activity is strengthening at the start of the development pipeline, demand for new-build homes is holding up and investment plans are rising.

The research also highlights a growing focus on innovation and automation. Among businesses facing skills shortages, 40% are investing in new construction techniques to reduce manual labour. In parallel, 39% are expanding early career programmes and 36% are increasing training and upskilling efforts.

Average planned spending on artificial intelligence stands at £441,281, directed towards AI-supported design and planning (37%), renewable and energy-efficient materials (36%), business management automation tools (35%) and building information modelling (29%).

The electronics segment shows the highest appetite for AI, with intended spend above £500,000. Trades including plumbing (£380,000), carpentry (£347,320) and painting and decorating (£328,371) also plan substantial, though smaller, allocations, indicating that digital tools are being taken up across the supply chain rather than only by large developers.

Consumer and developer priorities diverge on some aspects of product design. Over the next year, 31% of developers of new-build homes expect buyers’ desire for customisable layouts and finishes to have the greatest impact on their approach, with 27% anticipating pressure for improved digital infrastructure such as high-speed broadband.

Yet when consumers were asked which factors most influence their choice of home, the top responses were access to gardens or shared green space (42%), proximity to transport hubs (31%) and closeness to parks or countryside (30%). Only 17% ranked digital infrastructure as a leading consideration and 11% prioritised customisation.

“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,” said Jason Constable, head of real estate at Barclays Corporate Banking. 

“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.”

John Ainsworth, head of real estate at 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.”