The Barclays Business Prosperity Index Housebuilding Deep Dive has found 83% of businesses in the sector are confident about the year ahead.

This is based on anonymised client data from around 70,000 UK businesses.

Heightened caution was evident among SME firms, with a reduction recorded in the amount of cash borrowed by -17.7%. At the same time, saving buffers were increased by 3%.

Conversely, a smaller number of larger firms increased borrowing (20%) and drawn down savings (-8.9%).

“Activity is generally subdued among SME housebuilders, with nearly three in 10 expecting no increase in output in the year ahead,” said John Ainsworth, head of real estate at Barclays Business Banking.

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“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.”

The research analysed businesses’ investment focus areas, with talent, skills and AI gaining the most attention.

Four in 10 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%).

Meanwhile the average intended AI investment of £441,281 reflects growing demand for AI-assisted design and planning (37%).