Budget erodes confidence in the heat pump sector

UK: The UK’s leading heat pump association has accused yesterday’s budget of further eroding confidence in the heat pump sector.

HPA UK chief executive Charlotte Lee criticised the budget’s failure to take further action on electricity costs, against the introduction of 5% VAT on heat pumps in April 2027 and the freeze on Boiler Upgrade Scheme spending.

“Today’s budget represents yet another injection of uncertainty into the deployment of heat pumps, further eroding confidence across the sector,” Lee said. 

She also described the VAT hike on heat pumps in the face of the second global fossil fuel crisis in less than five years as “reckless”, claiming it undermined the budget’s emphasis on national security.

“Reducing planned funding for the Boiler Upgrade Scheme, at a time when applications are growing strongly is incomprehensible and risks creating a hiatus in the market whilst the sector waits for the full implementation of the Warm Homes Plan. 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.

While welcoming the new Warm Homes Loan Scheme to help households with the upfront cost of heat pumps, Lee said that without further action on electricity costs, it would not be enough to drive the market. “Beyond help for a small number of firms through the British Industrial Competitiveness Scheme this budget offers nothing to help businesses electrify,” she said.

“Meeting the government’s target of 450,000 heat pump installations a year by 2030 could deliver £3.2bn in economic activity. To realise this, the sector urgently needs to see meaningful action to reduce the price of electricity relative to gas, paired with commitment, clarity and implementation on the full package of clean heating support.”