The travellers told a BBC reporter they would exploit the loophole in the law
Twelve traveller families have moved to a field in Gloucestershire which they own but do not have planning permission to develop.
The travellers brought diggers and lorries on to the site at Southend Lane in Newent on Friday.
Forest of Dean District Council was not able to secure an injunction to stop the work.
A council spokesman said it would be seeking possible enforcement action regarding development of the site.
Councillor Len Lawton, of Forest of Dean District Council, said: "There's no planning consent.
"All this work you see taking place - everything beyond these hedges currently is in breach of these regulations."
One man, who did not want to give his name but lives near the site, said: "It's all very unfair because we all have to go through the stages of planning and the costs and of course they're getting away with everything."
The local MP, Mark Harper, said: "I understand that the district council tried to secure an injunction today but the judge refused the application.
"That means that the travellers will be able to move onto the site and the council will have to pursue them through the planning system which may well take a considerable time.
"This highlights the weak position of local councils in these situations. Local people find it very frustrating that the law can be flouted in this way and it appears to be almost impossible to do anything about it quickly."