FMB warns 3.9% minimum wage rise risks squeezing small builders after Budget

The Federation of Master Builders (FMB) has warned that the minimum wage rise announced in the Budget on 28 October could make it harder for small building firms to recruit, train and retain workers.

Responding to the Chancellor's Budget, the trade body said fair pay must be matched by practical measures that help smaller employers absorb rising labour costs.

Brian Berry, Chief Executive of the FMB, said: "For small building firms operating on tight margins, a further increase will be difficult to absorb."

He described the package as a budget of many small measures and said it was uncertain whether they would add up to drive bigger change in construction.

The wage figures

According to GOV.UK, the National Living Wage, the minimum rate for workers aged 21 and over, will rise by 3.9% to £13.21 an hour. HM Treasury said the increase takes effect on 1 April 2027 and adds £910 to the gross annual earnings of a full-time worker on the rate.

The Low Pay Commission said the 18-20 rate will rise to £11.27 and the 16-17 and apprentice rates to £8.31, all 3.9% increases. The Government accepted the commission's recommendations in full.

Rate from 1 April 2027	£ per hour
Aged 21 and over	13.21
Aged 18-20	11.27
Aged 16-17 and apprentices	8.31

Baroness Philippa Stroud, Chair of the Low Pay Commission, said discussions with workers and employers this year reflected tough economic headwinds across the economy.

Housing measures

The FMB welcomed support for first-time buyers but said housing measures must work for SMEs as well as the largest developers. Berry said the Your First Home scheme could strengthen demand for new homes but would have a minor impact on smaller house builders.

"If the Government wants more regional growth, it must ensure local SME house builders can share in the opportunities created by any increase in housing demand," he said.

HM Treasury said Your First Home will help 70,000 people onto the property ladder. According to GOV.UK, the scheme is for first-time buyers purchasing a new-build home in England and offers a government equity loan worth 20% of the purchase price, interest free for five years, with a deposit of at least 2.5%.

GOV.UK said developers of all sizes will be able to take part, subject to meeting the scheme requirements, and that applications are expected to open in February 2027.

HM Treasury also said the Budget exempts smaller housing developments on brownfield land from Biodiversity Net Gain requirements.

Fuel duty, tax and VAT

Berry welcomed what the FMB described as an extension of the fuel duty freeze, saying it would offer some stability to builders. HM Treasury described the measure as extending the 5p cut to fuel duty for a further six months.

The FMB said the Budget was a missed opportunity to cut VAT on energy-efficiency improvements and to give small builders the confidence to invest in green skills and apprenticeships.

Two days before the Budget, Berry had described it as an opportunity for the Chancellor to back homeowners and small firms.

The FMB, which says it gives small and medium-sized building companies a voice, said many small firms would continue to face difficult decisions on recruitment, training and growth without significantly more government support.

The new wage rates apply from 1 April 2027, two months after Your First Home is expected to open for applications.