--- title: Four cost drivers hitting SME developer margins in 2026 description: Labour up 17%, materials up 15%, Building Safety Levy rates now confirmed. What SME developers need to know—and do—before October 2026. image: https://www.shojin.co.uk/hubfs/Firefly_Gemini%20Flash_Construction%20site%20scaffolding%20on%20a%20residential%20building%20at%20dawb%2c%20tight%20crop%20focusing%20%20938226.png --- Don’t invest unless you’re prepared to lose all the money you invest. This is a high-risk investment and you are unlikely to be protected if something goes wrong. Take 2 minutes to learn more. Risk information **Risk summary for investments in speculative illiquid securities which are arranged by a firm by way of an online platform.**   **Estimated reading time: 2 min**   Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be very complex and high risk.   **What are the key risks?**   1. **You could lose all the money you invest** - By investing into a real estate project through Shojin you will be investing in a Bond instrument issued by Special Purpose Vehicles (SPV’s) which provide a funding facility for the purpose of real estate development. If the project fails, Investors can lose some or all of the money they invested. - Advertised rates of return aren’t guaranteed. This is not a savings account. If the project doesn’t pay the SPV back as agreed, you could earn less money than expected or nothing at all. A higher advertised rate of return means a higher project risk with an increased probability of losing your money. - Due Diligence and project oversight is carried out by the platform on each Shojin project that you are investing into to assess how well they are expected to perform. However, you should always also do your own research before investing. - These investments are sometimes held in an Innovative Finance ISA (IFISA). While any potential gains from your investment will be tax free, you can still lose all your money. An IFISA does not reduce the risk of the investment or protect you from losses. 2. **You are unlikely to be protected if something goes wrong** - Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. [Try the FSCS investment protection checker here.](https://www.fscs.org.uk/check/investment-protection-checker) - Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA regulated firm, FOS may be able to consider it. [Learn more about FOS protection here.](https://www.financial-ombudsman.org.uk/consumers) 3. **You are unlikely to get your money back quickly** - This type of property investment could face delays that can delay payments. These investments could also fail altogether and be unable to repay investors their money. - You have the opportunity to sell your investment early through the secondary market but there is no guarantee you will be able to find someone willing to buy. 4. **This is a complex investment** - This investment has a complex structure to ensure the interest of investors is protected. Investments are made into each designated project SPV and are ringfenced from other project SPV's to ensure full transparency of each investment made. - You may wish to get financial advice to understand how the structure works before deciding to invest. 5. **Don’t put all your eggs in one basket** - Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well. - [A good rule of thumb is not to invest more than 10% of your money in high-risk investments.](https://www.fca.org.uk/investsmart/5-questions-ask-you-invest) [If you are interested in learning more about how to protect yourself, visit the FCA’s website here.](https://www.fca.org.uk/investsmart) [For further information about minibonds, visit the FCA’s website here](https://www.fca.org.uk/consumers/mini-bonds). 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We share opportunities for global investors to gain exceptional returns. 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[Why us ![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light.svg)![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light-white.svg)](https://www.shojin.co.uk/borrow/why-us) [Overview ![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light-white.svg)![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light.svg)](https://www.shojin.co.uk/borrow) Products [![git-fork-light](https://www.shojin.co.uk/hubfs/shojin/icons/git-fork-light.svg) ![git-fork-light-1](https://www.shojin.co.uk/hubfs/shojin/icons/git-fork-light-1.svg) Whole loan We provide a combination of senior and junior debt to allow developers to take on larger schemes](https://www.shojin.co.uk/borrow/products/whole-loan) [![house-line-light](https://www.shojin.co.uk/hubfs/shojin/icons/house-line-light.svg) ![house-line-hover](https://www.shojin.co.uk/hubfs/shojin/icons/house-line-hover.svg) Mezzanine Top up funding that allows you to minimise your contribution, enhancing your return on capital whilst maintaining full control.](https://www.shojin.co.uk/borrow/products/mezzanine) [![door-light](https://www.shojin.co.uk/hubfs/shojin/icons/door-light.svg) ![door-hover](https://www.shojin.co.uk/hubfs/shojin/icons/door-hover.svg) Bridge Short-term senior and junior debt for land acquisition, refinancing, and conversions.](https://www.shojin.co.uk/products/bridge) [![door-light](https://www.shojin.co.uk/hubfs/shojin/icons/door-light.svg) ![door-hover](https://www.shojin.co.uk/hubfs/shojin/icons/door-hover.svg) Stabilisation and finish & exit Investment finance for completed or near-complete schemes that need time to optimise value before permanent refinancing or sale.](https://www.shojin.co.uk/stabilisation-finish-exit) How to borrow [![tree-structure-light](https://www.shojin.co.uk/hubfs/shojin/icons/tree-structure-light.svg) ![tree-structure-hover](https://www.shojin.co.uk/hubfs/shojin/icons/tree-structure-hover.svg) How it works Our process focuses on delivering an exceptional outcome for all parties.](https://www.shojin.co.uk/borrow/how-it-works) [![laptop-light](https://www.shojin.co.uk/hubfs/shojin/icons/laptop-light.svg) ![laptop-hover](https://www.shojin.co.uk/hubfs/shojin/icons/laptop-hover.svg) Apply Submit your application or request a call back](https://www.shojin.co.uk/borrow/how-it-works#APPLY) Elevate your investing Browse our blog for news, features, market update and special reports to build your real estate investing knowledge. 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[Contact us ![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light-white.svg)![](https://www.shojin.co.uk/hubfs/shojin/icons/arrow-right-light.svg)](https://www.shojin.co.uk/company/contact-us) Learn more [![globe-light](https://www.shojin.co.uk/hubfs/shojin/icons/globe-light.svg) ![globe-hover](https://www.shojin.co.uk/hubfs/shojin/icons/globe-hover.svg) About us Our mission, vision and purpose](https://www.shojin.co.uk/company/about-us) [![users-three-light](https://www.shojin.co.uk/hubfs/shojin/icons/users-three-light.svg) ![user-three-hover](https://www.shojin.co.uk/hubfs/shojin/icons/user-three-hover.svg) Team We're an experienced team of real estate and investment professionals](https://shojin.co.uk/company/about-us#TEAM)   [![list-checks-light](https://www.shojin.co.uk/hubfs/shojin/icons/list-checks-light.svg) ![list-checks](https://www.shojin.co.uk/hubfs/shojin/icons/list-checks.svg) Careers Take your career to the next level](https://www.shojin.co.uk/company/careers) [![git-fork-light](https://www.shojin.co.uk/hubfs/shojin/icons/git-fork-light.svg) ![git-fork-light-1](https://www.shojin.co.uk/hubfs/shojin/icons/git-fork-light-1.svg) Partnerships Partner with us to increase access to real estate investing](https://www.shojin.co.uk/company/partnerships) [Blog](https://www.shojin.co.uk/insights/tag/blog) 3 min read # Four cost drivers hitting SME developer margins in 2026 [BCIS](https://www.bcis.co.uk/) (Building Cost Information Service) forecasts 17% construction cost increases through 2030. As chief economist David Crosthwaite put it in December: "The challenge for 2026 will be managing those pressures in a market where clients may start to feel more confident, but margins remain tight."   For SME developers, four cost drivers are hitting construction budgets simultaneously and each requires a different response. ###### 1. Labour: The structural squeeze   The construction workforce has shrunk 10.8% since the pandemic—some 250,000 jobs have gone. [CITB](https://www.citb.co.uk/) (Construction Industry Training Board) estimates the industry needs 251,500 additional workers by 2028, and there's no obvious source for them. Apprenticeship completions remain low and the EU workforce that plugged shortages pre-Brexit has largely disappeared. In London, EU construction workers dropped from 42% to just 8% between 2018 and 2021.   BCIS forecasts the Labour Cost Index rising 17% through Q4 2030. Unlike the 2022 materials spike, this isn't a supply chain blip that will resolve itself. It's structural and, to an extent, demographic.   What this means: Trades with the steepest shortages, like thermal insulation, steelwork, electrical, will see the sharpest wage growth. If you can lock in subcontractor relationships now, rather than tendering project-by-project, you'll benefit from priority access when it matters. ###### 2. Materials: Moving again   Material prices are climbing again. The 3.0% year-on-year increase to November 2025 may sound modest, but it marks the end of the pricing plateau that gave developers breathing room.   BCIS forecasts 15% materials cost increases through 2030. Not as dramatic as the post-Covid surge, but steady pressure that erodes margins over a typical development cycle.   What this means: Standard just-in-time delivery assumptions are risky. Engaging suppliers at the design stage and before specifications are locked in will prevent costly substitutions and delays later. ###### 3. Building Safety Levy: The new line item   The Building Safety Levy (England) Regulations 2025 passed Parliament in November. The levy launches 1 October 2026, with rates confirmed for every local authority in England.   Rates range from £12.70/sqm in County Durham to £100.35/sqm in Kensington & Chelsea. Brownfield sites qualify for 50% relief—but only where 75%+ of the redline is previously developed land. Crucially, the levy applies to gross internal area, including communal spaces. Apartment schemes pay on corridors, lobbies, and bin stores.   Worked example: A 50-unit scheme averaging 75 sqm per unit. In Tower Hamlets at the brownfield rate (£30.60/sqm): £114,750. The same scheme in Westminster (£91.80/sqm brownfield): £344,250. That's a £230k difference based purely on postcode.   What this means: Building control applications submitted before 1 October 2026 avoid the levy entirely—provided works commence within three years. If you're close to submission, there's a meaningful incentive to accelerate.   ###### 4. Gateway delays: Improving, but still slow   Some good news: the Building Safety Regulator made 700+ decisions in Q4 2025, its highest quarter since launch. The backlog is clearing. But developers are still building six-month buffers into programmes for Gateway approvals, and that's prudent.   Extended programmes don't just add time—they multiply costs. Labour inflation compounds. Materials pricing shifts. Finance charges accumulate. A 25% programme extension rarely means 25% more cost; the effect is multiplicative.   What this means: Build Gateway timelines into feasibility assumptions, not construction planning. And [work with lenders who structure facilities around these realities](https://www.shojin.co.uk/borrow/why-us), not pre-2024 norms.   ###### The bottom line   These four drivers aren't moderating—they're compounding. Labour shortages are structural. Material prices are rising again. The Building Safety Levy launches in October with confirmed rates. Programme delays persist even as the BSR improves.   The question for 2026: do your appraisals reflect the market as it is, or as it was?   ---   ##### FAQs   ###### How much will the Building Safety Levy cost my project?   Rates range from £12.70/sqm to £100.35/sqm depending on location, with brownfield sites receiving 50% relief. The levy applies to gross internal area including communal spaces. A 50-unit scheme costs around £115k in Tower Hamlets or £345k in Westminster. Applications submitted before 1 October 2026 are exempt if works commence within three years. ###### What's driving construction cost inflation?   Labour is now the primary driver—the workforce has shrunk 10.8% since the pandemic with 251,500 additional workers needed by 2028. BCIS forecasts 17% labour cost increases and 15% materials increases through 2030. Unlike the 2022 materials crisis, labour shortages are structural and won't self-correct. ###### How should I adjust development programmes?   Budget six months for Gateway approvals despite recent BSR improvements. Extended programmes amplify all other cost pressures through compounding effects on labour, materials, and finance. Factor this into financial models, not just project planning. [Written by Shojin](https://www.shojin.co.uk/insights/author/shojin) Published 27 January 2026 Back to top![](https://www.shojin.co.uk/hubfs/shojin/icons/backto-top.png) Subscribe to newsletter Subscribe to receive the latest Shojin insights and resources to your inbox every week. #### Share this post - [![](https://www.shojin.co.uk/hubfs/shojin/icons/share-linkedin.svg)](http://www.linkedin.com/shareArticle?mini=true&url=https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026) - [![](https://www.shojin.co.uk/hubfs/shojin/icons/share-facebook.svg)](https://www.facebook.com/sharer/sharer.php?u=https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026) - [![](https://www.shojin.co.uk/hubfs/shojin/icons/share-twitter.svg)](http://twitter.com/intent/tweet?text=https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026) - [![](https://www.shojin.co.uk/hubfs/shojin/icons/share-email.svg)](mailto:?subject=https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026&body=https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026) More in this series ## Similar insights you might like [View all](https://www.shojin.co.uk/insights) [![](https://www.shojin.co.uk/hs-fs/hubfs/Blog/How%20to%20invest%20in%20high%20inflationary%20times/How-to-invest-in-high-inflationary-times-1960.jpg?width=352&name=How-to-invest-in-high-inflationary-times-1960.jpg)](https://www.shojin.co.uk/insights/news/how-to-invest-during-periods-of-high-inflation) [Blog](https://www.shojin.co.uk/insights/tag/blog) ### [How to invest in high inflationary times](https://www.shojin.co.uk/insights/news/how-to-invest-during-periods-of-high-inflation) [![](https://www.shojin.co.uk/hs-fs/hubfs/Berkeley%20Square,%20Salford/Images/Site%20visit%20-%20July%202024/Photos/Berkeley-Square-visit%2c-July-2024-800-1.jpg?width=352&name=Berkeley-Square-visit%2c-July-2024-800-1.jpg)](https://www.shojin.co.uk/insights/video-update-berkely-square-salford-july-2024) [Blog](https://www.shojin.co.uk/insights/tag/blog) ### [Video Update: Berkeley Square, Salford site visit](https://www.shojin.co.uk/insights/video-update-berkely-square-salford-july-2024) Shojin visits Salford, one of the UK's best-performing areas for economic growth. 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The risks involved will vary by project types, so please make sure you have read and understood the specific risks associated with the investment. Investments made on this website should only be made as part of a diversified investment portfolio. For more details, see the Key Risks. Projections or estimated returns are not a reliable indicator of actual future performance and eventual returns or dividends may be lower than predicted. Information presented on this website is for guidance purposes only and does not constitute financial advice. If you are unsure of the suitability of an investment, please contact your financial adviser for professional advice. Shojin is a trading name of Shojin Financial Services Limited. This website is a financial promotion approved by Shojin Financial Services Limited which is authorised and regulated by the Financial Conduct Authority (FRN: 716765) (see [www.fca.org.uk/register](https://www.fca.org.uk/firms/financial-services-register) for more information). Companies that issue investments on this platform, including bonds issued by Shojin entities, are not themselves regulated by the Financial Conduct Authority and investments made on this site are not covered by the Financial Services Compensation Scheme. The investment opportunities listed on this website are not offers to the public and can only be entered into by certain types of investors who have satisfied certain investment criteria. [![shojin-footer-logo](https://www.shojin.co.uk/hs-fs/hubfs/shojin/shojin-footer-logo.png?width=86&height=31&name=shojin-footer-logo.png)](https://www.shojin.co.uk) © 2026 Shojin — All Rights Reserved ```json { "@context" : "https://schema.org", "@type" : "BlogPosting", "author" : { "@type" : "Person", "name" : "Shojin", "url" : "https://www.shojin.co.uk/insights/author/shojin" }, "dateModified" : "2026-01-27T16:16:41.884Z", "datePublished" : "2026-01-27T14:00:41.000Z", "headline" : "Four cost drivers hitting SME developer margins in 2026", "image" : [ "https://www.shojin.co.uk/hubfs/Firefly_Gemini%20Flash_Construction%20site%20scaffolding%20on%20a%20residential%20building%20at%20dawb%2c%20tight%20crop%20focusing%20%20938226.png" ], "mainEntityOfPage" : { "@id" : "https://www.shojin.co.uk/insights/four-cost-drivers-hitting-sme-developer-margins-in-2026", "@type" : "WebPage" }, "publisher" : { "@type" : "Organization", "logo" : { "@type" : "ImageObject", "url" : "https://www.shojin.co.uk/hubfs/Signature%20-%20logo.png" }, "name" : "Shojin Property Partners" } } ``` ```json { "@context" : "https://schema.org", "@type" : "VideoObject", "contentUrl" : "https://6508127.fs1.hubspotusercontent-na1.net/hubfs/6508127/masterclass_nov_2022_-_uk_real_estate_investing_in_2023.mov%20(720p).mp4", "dateModified" : "2022-11-24T17:49:02.395Z", "description" : "", "duration" : "PT1H1M2.6S", "height" : 720, "name" : "UK Real Estate Investing in 2023", "thumbnailUrl" : "https://6508127.fs1.hubspotusercontent-na1.net/hubfs/6508127/masterclass_nov_2022_-_uk_real_estate_investing_in_2023.mov%20(720p).mp4/medium.jpg", "uploadDate" : "2022-11-24T17:45:32.161Z", "width" : 1108 } ``` ```json { "@context" : "https://schema.org", "@type" : "Article", "author" : { "@type" : "Organization", "name" : "Shojin" }, "dateModified" : "2026-01-27", "datePublished" : "2026-01-27", "description" : "BCIS forecasts 17% construction cost increases through 2030. Analysis of labour, materials, Building Safety Levy, and programme delays for SME residential developers.", "headline" : "Four cost drivers hitting SME developer margins in 2026", "publisher" : { "@type" : "Organization", "name" : "Shojin", "url" : "https://www.shojin.co.uk" } } ``` ```json { "@context" : "https://schema.org", "@type" : "FAQPage", "mainEntity" : [ { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Rates range from £12.70/sqm to £100.35/sqm depending on location, with brownfield sites receiving 50% relief. The levy applies to gross internal area including communal spaces. A 50-unit scheme costs around £115k in Tower Hamlets or £345k in Westminster. Applications submitted before 1 October 2026 are exempt if works commence within three years." }, "name" : "How much will the Building Safety Levy cost my project?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Labour is now the primary driver—the workforce has shrunk 10.8% since the pandemic with 251,500 additional workers needed by 2028. BCIS forecasts 17% labour cost increases and 15% materials increases through 2030. Unlike the 2022 materials crisis, labour shortages are structural and won't self-correct." }, "name" : "What's driving construction cost inflation?" }, { "@type" : "Question", "acceptedAnswer" : { "@type" : "Answer", "text" : "Budget six months for Gateway approvals despite recent BSR improvements. Extended programmes amplify all other cost pressures through compounding effects on labour, materials, and finance. Factor this into feasibility models, not just construction planning." }, "name" : "How should I adjust development programmes?" } ] } ```