UK construction sector faces higher wage costs

UK construction companies will face increased labor costs after Chancellor Rachel Reeves announced a 4.1% rise in the minimum wage, though the sector secured a reprieve on planned landfill tax increases that threatened to add further pressure to project costs.

UK construction firms will grapple with increased labor costs after Chancellor Rachel Reeves announced a 4.1% minimum wage rise in today’s Autumn Budget, though the industry secured relief on planned landfill tax reforms.

The minimum wage for over-21s will climb from £12.21 to £12.71 per hour in April, while rates for 18 to 20-year-olds jump 8.5% to £10.85. The chancellor also extended the freeze on national insurance and income tax thresholds for three years from 2028.

Industry leaders warned the measures will squeeze margins. Sean Keyes, chief executive of Liverpool consultant Sutcliffe, said firms will face “difficult choices about recruitment” and some projects will need repricing.

However, Reeves backed away from plans to merge the two-tier landfill tax system after lobbying from British housebuilders. The lower rate of £4.05 per tonne for inert materials will remain, compared with the standard £126.15 rate.

The Treasury said it revised its approach to avoid imposing “unavoidable costs on businesses” and protect the government’s target of building 1.5 million homes in England.

The budget also included £891m for the Lower Thames Crossing and £13bn in devolved funding for regional infrastructure projects across seven English mayoral authorities, including Greater Manchester, West Midlands, and the Greater London Authority.