Update on UK Construction Costs for Winter 2026

Please find an article from our colleagues at Rebuildcostassessment.com, UK-based providers of professional RICS‑regulated rebuild cost valuations, used to help property owners and insurers avoid underinsurance.

Construction costs across the UK remain high as we enter winter 2026. While inflation has slowed in the broader economy, rebuild costs continue to rise – driven by elevated labour rates, material inputs, and regulatory pressures. For property owners and insurance professionals, this means one thing: regular, data-driven review of sums insured is more critical than ever.

“While the headline rate might look moderate, the detail tells a different story,” says Sharon Masters AIIRSM MARLA, Technical Lead and Surveyor at RebuildCostASSESSMENT.com. “Some core components are still seeing sharp increases – particularly services and fit-out elements – which disproportionately affect commercial and mixed-use buildings.”

Based on our monitoring of national indices (BCIS & gov.uk), average rebuild costs are now around 3–5% higher than this time last year. This varies significantly by region, property type, and the nature of the work involved. While general construction inflation has eased, essential components, such as plumbing and kitchen installations, are increasing by around 6-8% in some cases, reflecting ongoing pressure in essential building elements.

Commercial and mixed-use properties continue to feel the most pressure, especially in areas like London, the South East, and Scotland’s central belt – where demand remains high and contractor availability is tight.

Supply chains are functioning more reliably than they were in the immediate aftermath of COVID-19 and the energy crisis. However, the cost of energy-intensive materials – including steel, bricks and cement – remains elevated. “Even though availability has improved, prices haven’t dropped in any meaningful way,” explains Sharon Masters. “And in many cases, labour is now a greater driver of inflation than the materials themselves.”

This is why rebuild values have not come down, despite a stabilisation in raw material pricing.

Too many policies continue to rely on index-linking alone. While it serves a purpose, it frequently lags behind real-world cost changes – particularly in volatile markets. Our data shows that sums insured updated by index-linking alone are often 10–15% below the actual cost of reinstatement.

This can result in serious shortfalls at claim and exposes brokers to regulatory risk if client needs have not been reviewed thoroughly.

Underinsurance is a clear risk, but overinsurance brings issues of its own. Under the FCA’s Consumer Duty, brokers and insurers must demonstrate that the customer is receiving fair value. If a building is insured for significantly more than it would cost to rebuild, the premium is excessive and the customer gains nothing in return.

Our analysis shows that nearly a quarter of UK buildings are overinsured by an average of 129% of their actual rebuild cost. Fair value requires accuracy in both directions.

“One of the most common reasons we see buildings under- or overinsured is reliance on outdated or estimated figures,” says Sharon Masters. “A professional RCA provides an auditable basis for cover – not only protecting the client but also demonstrating compliance with fair value expectations.”

The most reliable way to ensure appropriate cover is through a professional Rebuild Cost Assessment (RCA). We recommend an RCA at least every three years or sooner if the building has undergone material changes such as refurbishment, extension or significant services upgrades.

Forecasts for 2026 suggest a softening in inflation, with tender price increases expected to ease to around 2–3% over the year. But with skilled labour in short supply, costs are unlikely to fall meaningfully.

For now, precision is the best defence against a volatile rebuild environment:

• Know your rebuild cost

• Verify your sums insured

• Review regularly
  

Find out more about rebuildcostassessment.com.

We offer tailored small business insurance and trade-specific policies so you can pick and choose the cover and limits you need.

For more information visit our small business insurance page or call us on 0344 346 0409 to speak to a specialist adviser.


Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.