Rising labour costs are emerging as the biggest pressure point in property rebuild values, creating growing risks for agents and landlords relying on outdated sums insured according to new analysis from RebuildCostASSESSMENT.com.
While construction materials inflation has begun to ease – up 3.3% in the year to December 2025 – persistent skills shortages and wage growth across the construction sector are continuing to push reinstatement costs higher.
For agents, the shift presents a potential compliance and advisory challenge, particularly where buildings insurance valuations are carried forward without review or rely solely on index linking.
Labour now accounts for around 60% of total repair and reinstatement costs, meaning even modest increases in wages can quickly push sums insured out of line – raising the risk of underinsurance and reduced claim payouts.
LABOUR COSTS
Sharon Masters, Technical Lead and Surveyor at RebuildCostASSESSMENT.com, says: “Labour availability is currently a more significant cost driver than materials. Where skilled trades are in short supply, labour rates increase and reinstatement costs follow.”
Ongoing shortages across key trades such as electricians and plumbers – both listed on the UK’s Skilled Worker Temporary Shortage List – are continuing to drive pricing pressure and extend build timelines.
Masters adds: “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 reduces the risk of shortfalls at claim time.”
UPWARD PRESSURE
Industry data shows construction sector pay rose by 6.4% in the three months to March 2025, underlining the sustained upward pressure on labour costs despite improving materials trends.
Index linking alone may no longer provide an accurate reflection of rebuild costs, particularly following refurbishments, extensions or shifts in local labour markets.
Regular Reinstatement Cost Assessments are increasingly being positioned as essential, both to maintain accurate cover and to demonstrate compliance with Financial Conduct Authority Consumer Duty requirements.
With labour shortages expected to persist into 2026, agents are being urged to review insurance valuations more frequently to avoid exposure as rebuild costs continue to diverge from historic assumptions.
