Labour costs are the pressure point in rebuild values

Materials inflation has eased. Labour costs remain elevated and that is where reinstatement values can shift most quickly.

Recent government data shows materials price growth easing, with the “All Work” materials index rose 3,3% in the year to December 2025. However, construction earnings data and insurer commentary continue to highlight labour shortages and sustained pay growth. Where skilled trades are constrained, repair and reinstatement costs can remain under pressure.

“Labour availability is currently a more significant cost driver than materials,” says Sharon Masters, Technical Lead and Surveyor at RebuildCostASSESSMENT.com. “Where skilled trades are in short supply, labour rates increase and reinstatement costs follow.”

Official earnings data shows construction-sector pay growth remained elevated in 2025, with a 6.4% increase in the three months to March 2025.

Labour availability also remains constrained. Several core construction trades, such as electricians and plumbers, appear on the UK’s Skilled Worker Temporary Shortage List. This is a practical indicator of ongoing skills pressure in key roles. Where labour is harder to secure, both programme timelines and contractor pricing can be affected.

See our guide: Labour shortages push up rebuild costs

Index linking can be a useful baseline but it remains an average. It does not always reflect local labour market conditions or property-specific reinstatement requirements.

Where sums insured are carried forward year-on-year or using index-linking alone, they can gradually drift away from the true rebuild cost. This risk increases following extensions, refurbishments, or changes in local labour availability.

Labour is often the largest component of repair and reinstatement spend. In many insurance repair cost indices, it accounts for around 60% of the total.

That weighting matters. If labour rates increase, the buildings sum insured can fall out of alignment more quickly than expected. Where a policy applies an average clause, underinsurance may reduce a claim settlement in proportion to the shortfall.

BCIS has noted that “Labour cost pressures remain a key concern for the industry” and expects construction output growth to pick up from 2026.

Regular Reinstatement Cost Assessments (RCAs) remain essential to maintaining accurate sums insured. As a general guide, a professional assessment should be undertaken at least every three years, with index-linked adjustments in the interim — and sooner where a property has undergone material change.

A robust, auditable RCA provides a clear evidence base for the declared sum insured. It can also support firms in demonstrating fair value under the FCA’s Consumer Duty by showing how the figure has been calculated and reviewed.

The message is simple: reassess rather than assume. A professional RCA can help you sense-check that your buildings sum insured reflects current reinstatement costs and reduce the risk of shortfalls at claim time.