If you are doing just hand needle turn applique (not raw edge when you stich over the edges with your sewing machine), I would say you probably will have little to no shrinkage. I just finished a needle turn block all done by hand and I have no shrinkage. But I know when you cover the edges of a raw applique on a machine there is often shrinkage with that though. I have been cutting my backgrounds about 1 inch wider and longer just to be safe and have been fine.
Rachel