Why Housebuilding Supply Chain Leaders Feel Good About 2026

The Barclays Business Prosperity Index Housebuilding Deep Dive delivers encouraging news for the sector's supply chain network.

Despite affordability pressures for buyers, regulatory challenges and financial caution, four in five UK businesses (83%) operating in housebuilding and its supply chains remain confident about their outlook for the year ahead.

Barclays combined data from 70,000 UK businesses and research from 500 industry leaders and 2,000 consumers for the report. The findings reveal strengthening activity at the start of the development pipeline, sustained buyer demand for new-build homes and a major uplift in planned investment across the supply chain.

Pipeline activity and financial positioning

According to the research, architects (+2.3%) and quantity surveyors (+4.8%) recorded rising incoming cash flows between Q3 2024 and Q3 2025, signalling strengthening activity at the initial phases of the construction pipeline. This upstream momentum could indicate increased workflow for suppliers and subcontractors in the coming months.

The financial positioning within the supply chain shows a clear divide based on company size. Smaller firms demonstrated greater caution, reducing cash borrowed (-17.7%) while increasing savings buffers (+3%).

Conversely, larger firms have increased borrowing (+20%) and drawn down savings (-8.9%), potentially positioning themselves to capture greater market share.

Supply chain leaders plan to increase total investment by 38% over the next 12 months, targeting marketing (42%), new equipment (39%) and pay to attract talent (37%).

Skills and technology investment priorities

Talent, skills and AI are becoming major investment focus areas across the supply chain. Four in ten businesses with skills shortages are investing in new construction methods to reduce manual labour, alongside developing early career schemes (39%) and focusing on training and upskilling (36%).

Jason Constable, Head of Real Estate at 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."

The average intended AI investment of £441,281 ($550,000 USD) reflects growing demand for AI-assisted design and planning (37%), renewable and energy efficient materials (36%), business management automation software (35%) and building information modelling (29%).

Momentum is strong in electronics, where intended AI spend exceeds £500,000 ($623,000 USD), while plumbing (£380,000/$474,000 USD), carpentry (£347,320/$433,000 USD) and painting and decorating (£328,371/$409,000 USD) are also strong.

Preparing for regulatory changes

Nearly all firms (98%) say aligning with the government's Future Homes Standard is a priority for the next 12 months, but 82% are concerned that they will not be ready. Support is most needed in installing low carbon heating systems, applying the new Home Energy Model and meeting updated ventilation standards.

Despite this, businesses are being proactive, with 30% investing in specialist equipment, training and technology to boost compliance.

A quarter of homeowners live in a new-build property, rising to 47% of first-time buyers. New properties are most popular among Gen Z (61% of homeowners) with desirable location named as the top driver (28%).

One in five cited favourable mortgage terms and 17% reported energy efficiency as a major reason for buying new.

One in four housebuilders report high construction costs as a major barrier, followed by rising inflation, cost of raw materials and meeting the requirements of the Future Homes Standard. These cost pressures could impact procurement strategies and supplier negotiations throughout the chain.

John Ainsworth, Head of Real Estate at Barclays Business Banking, says: "Activity is generally subdued among SME housebuilders, with nearly three in ten expecting no increase in output in the year ahead. 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."