NOVEMBER 2026 | VOLUME 64 | ISSUE 9


Reduced funding for heat pumps could dent demand


The government’s decision to reduce planned funding for the Boiler Upgrade Scheme (BUS) has prompted concerns about the impact on heat pump installations, investment and the UK supply chain.


She adds: “The VAT hike on


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Announced in Chancellor John Healey’s October Budget, funding for the scheme will be £400m in 2027-28, down from the £600m previously allocated. Previous allocations totalled £1.992bn across the next three financial years: £600m, £683m and £709m respectively. A baseline of £400m a year would amount to £1.2bn over the same period, a diff erence of £792m before infl ation-linked increases in the fi nal two years. Designed to help property


owners in England and Wales install eligible low-carbon heating systems, the BUS was fi rst introduced in May 2022 and currently off ers grants of £7,500 for most qualifying air-to-water and ground-source heat pumps. Eligible off-grid properties replacing oil or LPG heating can receive £9,000 until the end of March 2027. Figures from the energy


regulator Ofgem show that 96,611 BUS grants had been redeemed by 30 September 2026, with £687.45m paid out since the scheme launched. The target remains 450,000


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heat pump installations a year by 2030, but while individual grant amounts remain unchanged, lower planned funding has raised questions about how many installations the scheme will support in future. A further change affecting


installation costs is the scheduled end of the temporary zero rate of VAT on qualifying energy-saving materials on 31 March 2027. From 1 April, the reduced rate of 5% will apply again. However, the government’s


commitment to clean energy has been reinforced by the launch of the new Warm Homes Loan Scheme, which off ers low- and zero-interest finance for heat pumps, solar panels and battery storage for UK households. Loans of up to £20,000 are available for air-to-water heat pumps and £35,000 for ground-source


systems, with some repayment terms extending to 30 years. The government has committed


£300m of grant capital to the scheme, which will be used to reduce the cost of fi nance off ered by participating lenders.


heat pumps in the face of the second global fossil fuel crisis in less than five years is reckless and undermines this Budget’s emphasis on national security.” Speaking on behalf of oil


heating body OFTEC, CEO Paul Rose is equally concerned about the potential damage to the market and future investment by manufacturers. “The Boiler Upgrade Scheme


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has been the main driver for growing the heat pump market. Yet at the same time the government is proposing to continue to fine boiler manufacturers who don’t produce a target number of heat pumps through its Clean Heat Market Mechanism. Given the dependence of the heat pump market on public subsidy, this approach will only serve to damage the ability of our industry to invest, and is likely to lead to higher prices for customers.” Yselkla Farmer, CEO of trade


Industry reaction Responding to the announcement of cuts to funding under the Boiler Upgrade Scheme, Charlotte Lee, chief executive of the Heat Pump Association UK (HPA UK) expressed concern that it risks creating a hiatus in the market and puts in jeopardy the chances of the government reaching its installation targets: “The dual blow of tax rises on heat pumps and programme cuts risks fuelling yet another boom and bust cycle, threatening the existing supply chain and future investment in the UK.”


association BEAMA, has also criticised the government’s decision not to renew 0% VAT on energy saving materials: “It doesn’t make sense,” she says. “On the one hand it is cutting VAT on household electricity bills, but on the other it is adding VAT back onto the products that help people use less energy. “Energy-saving technologies


can save a typical three-bed semi up to £250 a year on electricity bills. Ending VAT relief risks slowing the rollout of smart energy technologies and forcing manufacturers to reconsider investment in facilities and jobs.”


Training Update See page 16


Inside this issue phamnews.co.uk


ESA fi nalists See page 12


Gadgets & Tools See page 13


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