- Reported cuts to the Boiler Upgrade Scheme could weaken demand and investment before any funding changes take effect.
- Government evaluation suggests the grants have driven installations that would otherwise not have happened.
- The commercial impact will depend on whether ministers reduce individual grants, restrict their availability or change future budgets.
The UK’s heat pump industry faces renewed uncertainty after reports that ministers are considering cuts to the Boiler Upgrade Scheme, prompting warnings that reduced support could undermine investment in installers and manufacturing capacity.
The Guardian reported that ministers were preparing to reduce heat pump subsidies to help finance higher defence spending. No revised funding settlement or implementation timetable has been confirmed as yet.
Nesta and the Energy and Climate Intelligence Unit issued responses on Monday, arguing that weakening support for electric heating would increase the UK’s exposure to imported fossil fuels.
“The Boiler Upgrade Scheme is the backbone of the heat pump market in England and Wales,” said Madeleine Gabriel, Nesta’s director of sustainable future. The foundation warned that businesses and heating engineers had invested in cleaner heating in response to government policy.
The scheme currently provides £7,500 towards eligible air-to-water and ground source heat pumps. Qualifying properties without a mains gas connection that replace oil or LPG heating can receive an additional £1,500 until March 2027. Grants are administered through installers, helping households meet the upfront cost of changing their heating systems.
The uncertainty follows a period of increasing demand. Ofgem received 45,880 applications during the year to March 2026, up 19% on the previous scheme year. Separately, government figures recorded 8,150 applications in July, then a monthly record. Applications indicate interest and progress through the scheme, rather than completed installations.
Installation cost gap
The government’s own evaluation includes evidence that the subsidy changes purchasing decisions. Its 2026 report estimated that 74% of installations supported during the evaluation period were additional, meaning they would not otherwise have occurred.
That finding strengthens the argument that reducing support could affect deployment, although it cannot establish the impact of an unspecified future cut.
The published business case also identifies a substantial installation cost gap between heat pumps and conventional heating. It describes the scheme as a means of expanding demand while supporting a larger workforce and lower installation costs, providing for rising annual grant budgets through 2029/30.
For installers, uncertainty complicates decisions about training, recruitment and equipment purchases if there is no way of judging how many customers will qualify for assistance next year. Manufacturers face a similar problem when deciding how much stock and production capacity to commit.
“Deploying heat pumps is critical for energy security and therefore a matter of national security,” said Jess Ralston, energy analyst at ECIU.
There is nevertheless a distinction between ending support abruptly and reducing it gradually as costs fall. Nesta argues that a sustainable withdrawal would require cheaper installations, accessible finance and a lasting improvement in electricity prices relative to gas.
The immediate commercial question is how any savings would be implemented. Smaller grants would increase households’ contributions, while a tighter overall budget could restrict access even if grant values remain unchanged. Businesses need those details before they can assess the effect on orders and investment.
