The UK Autumn Budget professes to place energy affordability, security of supply and the transition to cleaner power firmly at the centre of the government’s economic agenda.
The commitment to reform the energy market, expand the use of fixed-price contracts for existing renewable generation and accelerate grid connections is a welcome step towards reducing exposure to volatile international gas prices and creating a more predictable environment for investment.
However, the real test will be delivery: investors need clarity on policy, planning, grid capacity and long-term revenue frameworks to unlock the capital required for renewables, storage and network upgrades. The Budget sets a potentially important direction of travel, but turning these commitments into lower energy costs, greater energy security and sustainable industrial growth will require consistent policy and sustained investment.
Low-cost loans
A particularly welcome measure for the renewables sector is the introduction of government-backed, low and no-interest loans to help households overcome the upfront costs of installing renewable technologies, including solar panels, battery storage and heat pumps.
With loans offering interest rates up to five percentage points below standard market rates, the scheme has the potential to accelerate adoption, reduce energy bills and strengthen resilience against volatile international energy prices.
Industry comments:
Dan Marsden, Director of Renewables at Wolseley Group, said: “It’s encouraging to see additional support for consumers to cover the cost of heat pumps with the new loan scheme announced yesterday.
“However, with no confirmation of extending 0% VAT on energy saving materials beyond 2027, and a Boiler Upgrade Scheme funding cap at £400 million minus inflation, we call on government to confirm their revised renewables installation targets to give businesses and installers renewed investment confidence.
“Wolseley has invested significantly in supporting installers and customers with the transition to renewables. This includes transforming our supply chain and logistics network to deliver renewables at the pace and scale needed to decarbonise homes across the country, as well as supporting the future workforce with comprehensive training packages.
“We are laying the groundwork for a thriving renewables industry across the UK and stand ready to further our investment with stable, long-term policy framework. We hope the Government will soon outline how it will continue to support the industry to grow.”
Ed Thomas, Head of Government and External Affairs at Worcester Bosch: “At Worcester Bosch, we strongly support the move to decarbonise heating through delivering the right technology for the right customer, backed by trusted advice and genuine choice. Heat pumps are a growing part of our extensive technology portfolio, and we’re launching a new product later this year.
“While we’re very keen for the UK heat pump market to grow, at the moment it remains relatively small.
“The launch of the Warm Homes Loan Scheme, continuation of the Boiler Upgrade Scheme and the Chancellor’s commitment to bringing down energy costs are all very positive developments and will do a lot to encouraging the growth of a self-sustaining heat pump market.”
Paul Rose, CEO of OFTEC, said: “We welcome the government’s recognition that households who rely on heating oil, many of them in rural areas, have faced a difficult year due to the conflict in the Middle East.
“However, most of today’s support is focused on gas and electricity. Oil heated homes will see some benefit on their electricity bills, but while gas households will also see standing charges abolished there is no equivalent help for households on heating oil.
“The £100 payment for homes in council tax bands A-D is welcome, but households that are asset rich, but cash poor will miss out – and that could include many in rural areas. The government has committed to helping communities outside major towns and cities so it must make sure the 1.7 million homes that use heating oil are not left behind.
“The Budget also cuts the future planned heat pump grant funding through the Boiler Upgrade Scheme (BUS), which 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.
“For consumers, despite cuts to BUS, the government’s message is still that heat pumps are the preferred solution. However, many older rural homes will face thousands of pounds to make the switch even with the grants available. It was disappointing there was no mention of renewable liquid fuels as an alternative solution when 16,000 people supported them in the Alternative Clean Heating consultation. These fuels could cut emissions from oil heated homes quickly, using their existing boiler and tank, which removes the high upfront cost. We continue to urge the government to publish its full response to the consultation to give clarity to oil heated households.”
Greg Jackson, Founder and CEO of Octopus Energy, said: “The government is right to support the development of the UK heat pump industry. With companies and public sector working together, we can continue the path of innovation and cost-reduction that will enable us to reduce Britain’s dependency on gas – a critical plank to improve our security and reduce heating bills.
“Moreover, this creates a secure future for the thousands of skilled professionals who’ve trained to install heat pumps and manufacture them here in Britain. This is a great example of the Prime Minister’s “good growth in every postcode”.”
Jeff House, External Affairs and Policy Director at Baxi: “In the Autumn Budget it is clear that energy costs and the associated impact on cost of living are a central consideration and there are some welcome moves in that regard.
“However, fears and speculation in past weeks over the Boiler Upgrade Scheme (BUS) appear to have been well founded: there is a significant cut to the scheme budget for future years tucked away in the detail. Looking at the commitments in the Warm Homes Plan, published earlier this year, the overall BUS budget for 2027-30 would appear to have reduced by some £750m plus, or around 100,000 fewer funded heat pump installations at the current £7,500 grant level.
“So, whilst we have immediate continuity, the planned BUS expansion becomes broadly flat for the rest of this decade, perhaps an acceptance that growth in the domestic retrofit market remains slow and any significant volume gains will now come from the new build sector.
“At a time when annual installation targets of 450,000 heat pumps per year by 2030 are being discussed, and the current consultation on the future of the Clean Heat Market Mechanism (CHMM) is built around ramping up manufacturer obligations based upon said target, it would appear there is a policy disconnect here that needs urgent attention.”
Yselkla Farmer, CEO of trade association BEAMA, which represents the electrotechnical manufacturing sector:
On VAT for ESMs: “The Government’s decision not to renew 0% VAT on energy saving materials doesn’t make sense. 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. This relief has helped incentivise households to invest before their boilers reach end of life. Ending it risks slowing the rollout of smart energy technologies and forcing manufacturers to reconsider investment in facilities and jobs. It is however welcome that heat batteries will be recognised as an ESM.”
On business energy costs: “We’re disappointed the British Industrial Competitiveness Scheme (BICS) hasn’t been extended to include more businesses. Many manufacturers of electrical products will now continue to pay policy costs on their electricity bills that other manufacturers will be exempt from.
“The cost of manufacturing in the UK is weighing on our members, with long-term investments on a downward trend. We’d like to see policy costs on electrical product production removed for every manufacturer in the UK. Not only would that make for a simpler (and fairer) test than the current eligibility rules, but it would give firms more capital to invest and hire in line with the aims of the Government’s Industrial Strategy.”
On energy bills and technology: “While we welcome the immediate financial support for those who need it and the commitment to reviewing the structure of electricity bills, the Government needs to focus on technology deployment as a way to lower householders’ bills every year and reduce the need for direct financial assistance. This relies on more than just running costs.
“With a mixture of better recognition of technology benefits in policy, advice, financial incentives and proportionate product regulation timelines, we can build a mass market energy transition for buildings and transport. Industry is waiting for details on the Warm Homes Fund, Warm Homes Agency and successor to ECO, and not publishing these on Budget day was a missed opportunity.”
On Electric vehicles: “The Government continues to send contradictory messages to consumers. It has announced plans to provide some financial support for those using public chargers, but it has also confirmed plans to introduce EV excise duty, legislate that public chargepoints must face 20% VAT and revise ZEV Mandate targets. The best way to save consumers up to £1200 a year is by helping them into an EV and enabling them to charge at home.”
Andrew Smith, Commercial Director of Installs at British Gas, said:“September’s Boiler Upgrade Scheme figures are another encouraging sign and show that more households than ever are considering the switch to more efficient heating methods as winter approaches.
“The announcement of the Warm Homes Loan Scheme in yesterday’s Budget is a welcome step forward in making low-carbon heating more affordable for even more households.
“Alongside the grants available through the Boiler Upgrade Scheme, access to more affordable finance can dramatically help households manage the upfront cost of making the switch and support further momentum in heat pump uptake.”
Tony O’Carroll, CEO of Conrad Energy, said: “This Budget has been delivered at a vital moment for the UK’s energy transition, and it is encouraging to see the Government maintain a focus on the energy sector. The reality is that energy touches every element of modern life, and is accordingly both at the heart of a number of the challenges that the UK faces and the solution to those challenges.
“Some of these challenges are tied directly to the scale of the change that is underway as we attempt to sharply increase electrification and were foreseeable, others such as the disruptions to the supply of LNG have shocked the system. It has been encouraging to see the Government acknowledge these challenges.
“GB Grid is useful evidence that the Government is focusing on the right areas in this regard, and we should not forget that the UK has made impressive progress towards decarbonising its energy in a range of areas. The Pathfinder 3 procurement process and Long-Term 29 are both examples of effective, and ongoing, collaboration between the public and private sectors, and it is to be hoped that we see more of this.
“These partnerships will only become more important as more decision-making powers are devolved. How this devolution is managed and kept aligned with a national strategy will be equally critical, especially for the energy sector, which will be called on to deliver infrastructure at both the national and the local level.”
Sachin Vibhute,Technical Consultant and Product Training Manager at LG Electronics, comments: “It’s reassuring to see that heat pump subsidies have remained intact in the budget. The Boiler Upgrade Scheme (BUS) has been an important barometer of public confidence in low-carbon energy solutions. And, with August 2026 seeing the second-highest number of voucher applications since the scheme began, the demand for this technology is clear.
“However, to ensure the industry can meet this growing demand, we need greater certainty about the future of the policy, including a clear timeline from the UK Government on its long-term plans for the scheme.
“Skills shortages also remain a challenge for the wider rollout and long-term maintenance of heat pumps. Building resilience in the low-carbon heating sector will require greater investment in training and skills development. Clear, sustained support from the UK Government will be essential to building the skilled workforce needed to deliver the transition.”
Kevin Wellman, Chief Executive Officer at The Chartered Institute of Plumbing and Heating Engineering (CIPHE), said:“We welcome the Government’s continued support for heat pumps and other renewable technologies through the Warm Homes Loan Scheme. Making these systems more affordable is an important step towards reducing energy costs for homeowners over the longer term, and we’re pleased that the loans can be combined with the Boiler Upgrade Scheme grant to help bring installation costs down further.
“We support the measures to tackle the cost of energy for households. Removing regressive standing charges, maintaining the VAT cut on electricity until July and providing targeted support through the £100 energy payment for households in council tax bands A–D are all relevant to addressing the financial pressures people face. Tackling fuel poverty means addressing the underlying causes and ensuring that those on low incomes receive appropriate financial support and can access fair energy tariffs.
“However, government investment in heat pumps must be matched by investment in the skills and competence of those installing them. Making these systems more affordable is important, but ensuring they are installed safely, correctly and efficiently is essential if consumers are to realise the benefits being promised. With so many plumbing and heating businesses operating as sole traders or micro-businesses, targeted support for training and professional development will be particularly important.
“Requiring MCS-certified installers is a step in the right direction, but competence must extend beyond installations funded through government schemes. We continue to call for a mandatory minimum standard for all heat pump installers, regardless of the system they are installing. There is a fundamental question here: who is installing these systems, and how can consumers be confident that they are competent to do so?
“Our recent survey found that only 3% of UK households carried out basic checks on the tradespeople they employed to work in their home. That should concern Government, industry and consumers alike. As investment in low-carbon heating increases, we must ensure that installations perform as intended and deliver the benefits consumers expect. Establishing a minimum standard of competence, alongside helping consumers understand how to check an installer’s credentials, is essential to protecting that investment.
“We cannot expect to invest in heating technology alone to deliver the transition. We must give equal attention to the people installing it and the consumers who will depend on it.”
Dave Sowden, Chief Executive of the Sustainable Energy Association (SEA) said: “The Warm Homes Loan Scheme is a positive step forward that will help to plug the gap for consumers that may still struggle to raise the funds for clean energy measures, as is the extension of the zero rate of VAT for electricity.
“However, these measures are effectively wiped out by the missed opportunity to extend the 0% VAT on energy saving materials from April 2027, despite plans to include heat batteries in the reduced rate. This tax increase to 5% will mean that, for the first time since 1998, energy saving will be taxed more heavily than energy consumption. This introduces a perverse incentive that runs completely contrary to the stated intention of long-term lower energy bills for consumers, adding yet more industry uncertainty.
“Our published analysis suggests this will cause a -£380.5 million impact to the UK economy by 2040, result in 365,000 fewer heat pump installations over the next 4 years, and reduce revenue for installers by up to £39 million per year by 2040. We continue to urge the Government not to take this retrograde step next April.
“We also remain concerned at effective cuts to the Boiler Upgrade Scheme (BUS) budget, capping the scheme at £400 million. Levies on electricity bills will prolong higher running costs for electrified heat, and cutting capital grant funding is another step backwards in moving away from the volatility of international fossil fuel prices.
“With the BUS being the main market driver for growth in retrofit electrified heating and market growth already stagnating, reducing the funding not only decelerates growth further, but also sends the wrong signal to the 20% of households where the Government considers heat pumps may not be the most cost-effective solution.”
You can read our full analysis here: The Impact of Reintroducing 5% VAT on Energy Saving Materials – Sustainable Energy Association.
