DECEMBER/JANUARY 2026 | VOLUME 63 | ISSUE 10
Industry counts the cost of ECO scheme cancellation
The scrapping of the Energy Company Obligation (ECO) scheme was one of the key announcements of the Autumn Budget. Consumers are promised a saving on energy bills as a result, but the loss of ECO funding could also have repercussions for manufacturers and contractors.
ECO has been in place in various forms for more than a decade and has been one of the main routes through which households received support for energy- efficiency improvements. Paid for by a levy on energy bills rather than from Treasury funds, the scheme will now come to an end by April next year, meaning that an estimated £1.7 billion will no longer be made available for energy retrofi t projects. The scheme funded retrofit
upgrades for households with an income lower than £31,000, supporting healthier living for less well-off families. While ECO has been beset by some well- publicised quality issues in recent times, most notably the scandal of defective solid wall insulation, most industry insiders anticipated that there would be some reform rather
than funding being withdrawn altogether.
access to the critical technologies that can both help deliver lower bills and tackle fuel poverty.” Calls for further government intervention are echoed by BEAMA, the trade body for manufacturers of electrical equipment. BEAMA CEO Yselkla Farmer comments: “Further measures are needed to ensure that we are creating a sustainable energy system by supporting investment from consumers and businesses with credible, delivery- focused policies that bring the public along with us. “With much still to do to achieve
The government has pledged to address some of the funding gap by adding £1.5 billion to the Warm Homes Plan, but this will be over three years and details of how, and when, this will be applied are yet to be announced. ECO 4 started on 1st April
2022 and has helped to fund the installation of just under 39,000 heat pumps up until the end of September 2025, an average of 1,000 appliances a month. For manufacturers looking to avoid fi nes under the Clean Heat Market Mechanism, its demise could make targets that much harder to meet. Martyn Bridges, director of external affairs at Worcester Bosch, estimates that it could result in fi nes in excess of £6m: “As these appliances were all eligible to be counted towards the target quota that manufacturers have to meet to avoid fines under CHMM, the CHMM targets need re-appraising. Removing on average 12,000 funded heat
pumps from the market would potentially result in fi nes in excess of £6m for manufacturers as they cannot meet their quotas.”
Devastating blow While welcoming the partial removal of environmental levies from the cost of electricity bills, Garry Felgate, CEO of The MCS Foundation, is equally concerned about the withdrawal of ECO funding, describing it as a “devastating blow”. “This will also be damaging to the small-scale renewable energy industry – one of the UK’s fastest growing sectors and one whose continued growth the government should be supporting,” says Felgate. “Businesses need certainty, not a cliff-edge that could damage supply chains, stifl e growth, and put countless jobs at risk. “We urge the government to now provide details of how the gap left by ECO will be fi lled to ensure low-income households have
Clean Power by 2030 and a need to accelerate progress towards the Net Zero 2050 requirement, now is not the time to introduce uncertainty. The scrapping of ECO and other domestic electricity levies will deliver immediate savings to energy bills. However, without a clear policy on how this essential funding will be replaced within the twice-delayed Warm Homes Plan, the Budget has added further policy confusion.” The oil heating body OFTEC is
also asking for clearer direction and policies to help lower the cost of low-carbon heating solutions. Malcolm Farrow, director of marketing and external affairs, says: “The recent speculation, inconsistency and delay in off- grid policy decisions are unhelpful for both industry and consumers. That’s why the government needs to urgently publish the Warm Homes Plan. This will help provide the clarity needed to deliver a transition that is fair, practical, and aff ordable.”
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