Limiting heat pump subsidies would be ‘sledgehammer’ to sector, experts warn

The UK Government would be taking “a sledgehammer” to the heat sector by restricting subsidies for eco-friendly heat pumps, energy industry experts and green groups have warned.

Chancellor Rachel Reeves is reportedly planning to announce a series of measures that could mean hundreds of thousands of homeowners lose their right to financial support for these clean heating systems.

Under its boiler upgrade scheme, the Government currently offers grants of up to £7,500 in England for householders to install heat pumps, which are more expensive than gas boilers but use electricity to transfer thermal heat from the outside air into home heating.

However, according to the Guardian, sources briefed on the Budget said Ms Reeves will take energy efficiency levies off bills and then fund them through the existing warm homes plan.

This means that heat pump subsidies would be restricted only to a select group of low-income homes and it would likely lead to a reduction in the amount of funding for home insulation, the publication said.

The move would aim to bring down energy bills at a time when the Government is said to be increasingly concerned that the cost of living crisis is pushing millions of voters towards Reform UK.

But energy industry experts say it would represent a cut to overall funding for the sector and will slow the transition from gas boilers.

Nigel Pocklington, chief executive of Good Energy, said: “In slashing funding for the Boiler Upgrade Scheme, the Government would be taking a sledgehammer to the heat sector.

“The scheme has spurred on the growth of an industry which supports thousands of green jobs and has allowed homeowners across the UK to decarbonise their heating.

“Stalling this progress risks undermining hard-won momentum, deterring private investment, and leaving households facing higher bills for longer.”

Pivotal

Dave Sowden, chief executive of the Sustainable Energy Association, said: “The boiler upgrade scheme is fundamental to establishing the foundations of the heat pump market, with over 85,000 vouchers being issued, and remains pivotal while the UK continues to have one of Europe’s slowest heat pump installation rates.”

He said the rumours of the Budget changes are “deeply damaging for investors, consumers, and manufacturers alike”.

“Cutting the schemes will also impede bill reduction and energy security while inflating fuel poverty,” he added.

Aadil Qureshi, chief executive of Heat Geek, a heat pump installation firm, said: “Following three years of stable policy on the boiler upgrade scheme, 5,000 independent installers and large businesses have invested in skilling up and grown their businesses by an average of five employees.

“A policy whiplash at this point in the market risks all these jobs and forward momentum on a pivotal move towards lower bills for everyone.”

Jess Ralston, head of energy at the Energy and Climate Intelligence Unit, said: “Sending mixed signals now could be seen as a slap in the face for those businesses, and could mean less growth in the very industries the Government says it wants to support.”

“The scheme’s success is in providing certainty that have allowed small businesses and larger manufacturers alike to invest in building up supply chains.”

Undermined

Charlotte Lee, chief executive of the Heat Pump Association, said: “Industry confidence is being undermined by the stop–start nature of the market, which cannot be paused and resumed without damaging long term investment and the ability to deliver.

“Full funding and swift publication of the warm homes plan is critical to restore stability and confidence across the sector to secure these jobs, investment, and ensure households and businesses continue to benefit from affordable, low carbon heating.”

John Wood, director of John Wood Plumbing Heating and Renewables Ltd, said: “My business has grown around heat pump installations, and the boiler upgrade scheme grant is a key driver for customers committing to low-carbon systems.

“If the grant is cut, demand drops overnight. That forces small specialist firms like mine to scale back investment, delay hiring, and reconsider long-term plans.”

James Clark, managing director of installers Elite Services Group, said: “Scrapping the boiler upgrade scheme threatens Elite Services Group’s skilled workforce and the local economy we support.

“Without it, the heat pump industry cannot survive, placing our significant investment of time, money, and hard work at risk.

“Ending the scheme would cause severe and lasting damage to our business and community.”

Jim Lacey, director of JLN Heating and Plumbing, said: “Without the boiler upgrade scheme grant, heat pump sales are near impossible.

“We have invested time and money in training tooling and testing and have been building consumer confidence.

“This will all be wiped out and the decarbonisation of our industry will be back to square one.”

A Treasury spokesperson said: “We do not comment on Budget speculation.

“The Budget will build stronger foundations to secure Britain’s future and focus on the priorities of working people: cutting waiting lists, cutting the national debt and cutting the cost of living.”