That may not work anyway due to the 'deprivation of capital' rules. If the DWP realise you have spent the money to qualify for UC they can treat you as still having it and avoid having to pay you. Also if you claim UC you will be assigned to a 'work coach' who will monitor what you do and check you are trying to find work, if the coach thinks you aren't doing enough they can impose a sanction which will stop your payment.
If you live on the boat at a fixed mooring you may also be liable for council tax and if you don't have a home mooring you will have to move regularly to avoid CRT taking action against you and possibly even insisting you take the boat off the canal.
If you do the work at a boatyard they will not be able to let you live on it at the same time without breaking planning rules. They won't be willing to create a problem for themselves to allow you to do part-time work on a project boat.
Then there is the problem of doing up the boat itself. Some years ago, I bought a boat on the understanding that I would be allowed to work on it for a few months before putting it back in the water (I didn't live on it but travelled to and from the yard daily). The boatyard were very helpful and I had access to electricity and water and got a lot of good advice from them but I think it would have been a strain on the relationship with them if I hadn't been there and clearly making progress on getting the boat suitable for relaunching and away to my own mooring. The key things that I remember is that everything is more complicated than you expect, takes a lot longer than you planned and costs a lot more than I budgetted. Having said that I enjoyed my time with the boat immensely and spent several happy years with her before selling her on - not at a profit financially though when costing how much I spent on the repair/refit and annual running costs.