The Barclays Business Prosperity Index found that architects and surveyors reported higher incoming cash flows in Q3 2025 than in the previous year, indicating stronger activity at the earlier stages of the development pipeline.
Smaller firms were more cautious and reduced the amount of cash borrowed, instead opting to increase savings buffers.
Conversely, a smaller share of larger firms increased borrowing and drew down savings, with Barclays saying this showed potential signs that they were utilising capital.
Housebuilders invest in skills and AI
Barclays found that two-fifths of firms experiencing skills shortages were investing in new construction methods to reduce manual labour, with 39% developing early career schemes and 36% focusing on training and upskilling.
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Firms also planned to invest in artificial intelligence (AI), with an average budget of £441,281. This suggested more demand for AI-assisted design and planning, as mentioned by 37% of respondents, while 36% said this would be useful for renewable and energy-efficient materials, 35% said it would go towards business management automation software and 29% said AI could be used for building information modelling.
Overall, business leaders plan to increase investment by around 38% over the next year, including 42% dedicated to marketing, 39% to new equipment and 37% on attracting new talent.
Firms not prepared for Future Homes Standard
Although 98% of firms responding to the survey said aligning with the Future Homes Standard was a main priority for the next year, 82% said they were unsure if they were ready for it.
Some 21% of firms said more support was needed around the installation of low-carbon heating systems, 20% wanted guidance in applying the new Home Energy Money and 18% wanted help with meeting updated ventilation standards.
Firms are still working towards this, with 30% saying they were investing in specialist equipment, training and technology to boost compliance.
Demand for new build
A quarter of the homeowners surveyed said they lived in a new-build property, rising to 47% among first-time buyers.
Newer homes were more popular among Gen Zs, accounting for 61% of homeowners. Some 28% said the desirable location of a new-build home was a main attraction, while a fifth pointed to favourable mortgage terms such as a higher loan-to-value (LTV) ratio. Some 17% said they liked new builds because they were more energy efficient.
Affordability is still a challenge, as 61% of Gen Zs hoping to buy a home in the next year said mortgage rates had a greater impact than house prices.
However, housebuilders noted barriers to building, as 25% cited high construction costs, followed by rising inflation, the cost of raw materials and meeting the Future Homes Standard’s requirements, all accounting for 19% of responses.
Jason Constable, head of real estate at 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.”
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 scale-up of smaller regional players. At Barclays, we are committed to providing the external finance needed to scale via our Business Prosperity Fund.”
