UK heat pump sector faces subsidy cut risk ahead of budget

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UK heat pump subsidy risk

Highlights

UK government is expected to cut funding for the boiler upgrade scheme, which currently provides grants up to £9,000 for heat pumps, in Wednesday's budget.
Installers warn that reduced subsidies could sharply weaken consumer demand, threaten jobs, apprenticeships, and hinder manufacturing and supply-chain growth in the heat pump sector.
UK heat pump adoption remains low at 3.5 units per 1,000 households compared to Norway's 632, with around a third of UK sales in 2024 from domestic production.

Budget pressure on household heat pump demand

As first reported by The Guardian, the UK government is expected to cut funding for the boiler upgrade scheme in Wednesday’s budget as it looks for savings, raising concern among installers that consumer demand will weaken sharply.

Bill Tuck, operations director at Sustain Homes in Watford, says about 75% of his customers use government support to pay for a heat pump. He says the scheme is the foundation of the business and that any reduction would be extremely damaging, even as the company tries to protect jobs and stay afloat.

The boiler upgrade scheme, introduced in 2022, offers upfront grants of up to £9,000 to help households and businesses replace fossil fuel and direct electric heating systems with lower-carbon options including heat pumps and biomass boilers. Installers say the support has helped narrow the price gap with conventional boilers, making the sales case easier at a time when households remain sensitive to upfront costs.

Jim Lacey of JLN Plumbing & Heating says the economic case for customers becomes much harder if the grant is reduced. Adam Killa, founder of Ask Renewables in Lancashire, says his business saw installations fall from several a week to none after the Renewable Heat Incentive closed in 2022, which he says shows how quickly demand can disappear when support is withdrawn.

Jobs, manufacturing and decarbonisation at stake

The expected cuts also risk slowing workforce development and supply-chain growth in a sector that the government has previously described as important to decarbonising heat. Installers say a weaker market would threaten apprenticeships, future recruitment and the broader ecosystem of firms involved in manufacturing, delivery and maintenance.

Heating in buildings accounts for nearly a fifth of UK greenhouse gas emissions, according to the latest government data cited in the report. The UK also remains well behind other European countries in heat pump deployment, with Norway at 632 installed units per 1,000 households compared with 3.5 in the UK.

According to the Heat Pump Association, about a third of heat pumps sold in the UK in 2024 were produced domestically. Installers say any sharp reduction in support could therefore affect not only fitting companies but also UK manufacturers and related trades.

James Meadway, co-director of thinktank Verdant, says cutting support for green jobs and manufacturing would undermine wider efforts to reindustrialise Britain. Industry participants say they expected subsidies to taper gradually as costs fell and adoption widened, but warn that a sudden reduction or full removal would disrupt momentum built since the scheme began.

In our earlier coverage of Chancellor John Healey’s pre-Budget stance, we explained that the government was signalling a tighter fiscal phase while sticking to deficit-reduction plans ahead of the October 28 Budget. We also highlighted that UK GDP edged up 0.1% in August, offering only modest support for the growth narrative as political pressure built around how the Budget should balance discipline with targeted relief for households and businesses.

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