Fair pay matters. But for small building firms already dealing with rising costs and tight margins, the Chancellor's latest increase to the minimum wage raises a difficult question: how much more can small employers absorb before it starts affecting their ability to recruit, train and grow?
The Autumn Budget offered some welcome stability, including an extension to the fuel duty freeze and support for first-time buyers. But our bigger concern at the Federation of Master Builders (FMB) is whether these measures go far enough to give small and medium-sized (SME) building businesses the confidence to invest in their future.
It was a budget of many small measures, but it’s uncertain whether they will add up to drive a bigger change in the construction industry.”
Autumn Budget 2026 at a glance
- Minimum wage increase: The National Living Wage will rise by 3.9% from April 2027, adding to employment costs for firms paying workers at or near the statutory minimum.
- A pause to any major changes to building regulations: This will be for the the remainder of this Parliament, other than safety critical measures.
- Support for first-time buyers: The Your First Home scheme could increase demand for new-build homes, but we're concerned that smaller house builders may see limited benefits.
- Some welcome certainty: The fuel duty freeze has been extended, while the decision not to increase Capital Gains Tax avoids further uncertainty.
- Missed opportunities: We believe more could have been done to reduce VAT on all RMI improvements that contain energy-efficiency improvements, rather than just specific installation that come to end next March.
Fair pay matters, but small employers need support too
The Chancellor announced a 3.9% increase in the National Living Wage, taking the minimum hourly rate for workers aged 21 and over from £12.71 to £13.21 in April 2027. The National Minimum Wage for 18 to 20-year-olds will also increase to £11.27.
For small building companies, the concern is not simply the higher hourly rate. It's what rising labour costs could mean for the decisions they make about taking on staff, training apprentices and expanding their businesses.
FMB Chief Executive Brian Berry warned that “For small building firms operating on tight margins, a further increase will be difficult to absorb.”
The risk is that a measure designed to improve pay could also make smaller employers more cautious about recruitment and training.
For builders, this makes it particularly important to understand how the new rates could affect future labour costs, especially when pricing projects or planning recruitment for 2027.
Will the housing measures help small house builders?
There was positive news for first-time buyers, with the Government's Your First Home scheme intended to make new-build properties more accessible.
We welcome measures that help people onto the housing ladder. Stronger demand for new homes is good news for the wider construction industry.
The scheme could strengthen demand for new-build homes, particularly for larger developers, while delivering limited benefits for smaller house builders, despite the important role they play in delivering new homes and supporting regional economies.
If the Government wants more regional growth, smaller house builders must also be able to share in the opportunities created.
Some welcome stability, but opportunities missed
The decision to extend the fuel duty freeze will offer some relief for building businesses that rely on vans and other vehicles to travel between sites, collect materials and carry out their work.
A pause of changes to building regulations, other than safety critical measures will bring stability to many companies.
The decision not to increase Capital Gains Tax also avoids adding another source of uncertainty for business owners.
These are welcome measures, but they do not remove the wider pressures facing smaller firms.
One particular disappointment for SME builders is the missed opportunity to cut VAT on energy-efficiency improvements.
Improving the energy performance of existing homes is an important part of the country's retrofit ambitions. But building firms need customers to invest in that work, alongside the confidence to develop the skills and capacity to deliver it.
We believe further action on VAT to help people upgrade their homes, apprenticeships and long-term certainty on energy efficiency upgrades to homes could help create those conditions, giving smaller businesses more opportunities to improve homes and develop their workforce.
What does the Budget mean for your building business?
There are some practical implications worth considering, particularly if you employ staff or are planning to recruit.
- Review your labour costs: Check how the new minimum wage rates from April 2027 could affect your wage bill, including any implications for future recruitment.
- Factor changes into your pricing: If you're preparing quotes or budgets for work extending into the next financial year, make sure your labour cost assumptions are up to date.
- Keep an eye on housing opportunities: The Your First Home scheme may support demand for new-build properties, although its relevance will depend on the type of work your business undertakes.
What needs to happen next?
The Government has set ambitious targets for housing, retrofit and economic growth. But those ambitions depend on having a construction industry with the capacity to deliver them.
That means ensuring smaller employers can manage rising labour costs, SME house builders can benefit from measures to increase housing demand, and firms have greater incentives to invest in energy-efficiency improvements and skills.
The Chancellor has offered some welcome measures. The question now is whether they add up to enough to help small builders grow.
