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Published: 23/10/2026
As the Autumn Budget approaches, questions remain over how the government will balance the immediate pressures facing the construction industry with its longer-term climate ambitions. BCIS executive director James Fiske discusses why protecting existing funding, strengthening retrofit investment and providing clearer policy direction should be government priorities.
The recent green light for the Jackdaw gas field has raised concerns that climate commitments are slipping down the political agenda, particularly following a summer marked by heatwaves and heightened flood risk. While decarbonisation is rarely a headline Budget issue, the government’s fiscal decisions will be important in demonstrating its commitment to carbon reduction and shaping the industry’s ability to invest, plan and deliver.
Encouragingly, industry progress on whole life carbon reporting and the standardisation of net zero carbon buildings has gathered momentum over the past 18 months. Key developments include the launch of Version 1 of the UK Net Zero Carbon Buildings Standard and the Royal Institution of Chartered Surveyors’ (RICS) Coalition for Life Cycle Emissions Alignment and Reporting.
Government action has been less forthcoming. The publication of the Future Homes and Buildings Standards in England was a significant step, but there has been less movement on wider measures to address whole life carbon.
In July 2025, the Ministry of Housing, Communities and Local Government (MHCLG) published research examining the impacts of measuring and reducing embodied carbon. According to MHCLG minister of state Florence Eshalomi(1), the government is still considering its next steps.
Policymakers face competing pressures, including the need to increase the quality and quantity of housing, strengthen energy security, reduce planning constraints and respond to the continued effects of geopolitical conflicts on supply chains and economic growth. The difficult fiscal environment adds to these challenges. Government borrowing rose to £24.5 billion in September 2026 as inflation drove up interest paid on its debt, further constraining the Chancellor’s room for new spending commitments.
Against this backdrop, and with construction businesses facing pressures of their own, a pragmatic approach to the Budget would prioritise a credible route to growth. This includes easing tax and fuel cost pressures on construction businesses and creating conditions that allow viable projects to progress.
Decarbonisation must nevertheless remain part of the government’s longer-term priorities. While economic and market conditions may constrain the pace of change, the Budget is an opportunity to assess progress and establish a clearer plan for the year ahead.
Protecting existing funding would be a positive outcome
Competing spending priorities and limited fiscal headroom make this Budget and next year’s Spending Review particularly concerning for efforts to decarbonise the built environment. Potential cuts to funding under the Warm Homes Plan are one area to watch.
The pressure stems partly from a reported £4.7 billion shortfall in defence spending, with ministers said to be considering reductions to heat pump subsidies to help bridge the gap. Support currently available under the Warm Homes Plan includes grants for insulation, solar panels and low-carbon heating, alongside heat pump subsidies through the Boiler Upgrade Scheme. Funding is also available for social landlords to improve the energy efficiency of existing homes.
Reducing this support could have consequences beyond the immediate impact on operational carbon emissions. Lower funding may weaken demand for retrofit work, affecting the development of skills, supply chains and installation capacity needed to deliver improvements at scale. If government investment increases again in future, rebuilding lost capacity could take time and involve additional costs, potentially delaying progress.
Investment in public buildings is another concern, particularly schools, hospitals and prisons. The end of the Public Sector Decarbonisation Scheme has already created uncertainty around future funding, while further reductions to departmental budgets could constrain improvements and affect progress towards national carbon reduction targets.
Introducing additional funding streams may be difficult in the current fiscal environment. Protecting existing commitments, however, alongside a clear indication of how support could develop as economic conditions improve, would provide a more stable basis for industry planning and investment.
New evidence strengthens the case for a national retrofit programme
Beyond protecting existing funding, recent research adds weight to the case for a coordinated national retrofit programme.
Research commissioned by Historic England(2) examined retrofit packages across five types of traditional home. It found that operational carbon savings could offset the initial embodied carbon associated with the upgrades within 1.5 to 7.3 years. Even under more pessimistic modelling assumptions, the longest payback period was 12 years, still well within the study’s 60-year assessment period.
Existing buildings will continue to account for a significant proportion of the stock occupied in the decades ahead, yet many properties remain energy inefficient and vulnerable to extreme weather.
A coordinated national programme, supported by long-term funding, could help stimulate demand and give businesses greater confidence to invest in the skills and capacity needed to deliver. Depending on the measures undertaken, benefits could include improved climate resilience, lower energy bills, reduced carbon emissions and more predictable workloads for construction businesses.
Better carbon literacy is essential to meaningful progress
Alongside investment in retrofit, the government should address gaps in carbon literacy across the built environment. Even where economic conditions limit immediate intervention, national investment in whole life carbon data should remain part of policy discussion.
The severe weather experienced during summer 2026 highlighted the risks that changing climate conditions pose to public safety, economic activity and living standards. Given the built environment’s contribution to national emissions, improving the industry’s ability to measure and reduce carbon throughout a building’s life cycle remains an important priority. This requires a clearer understanding of emissions associated with materials production, construction, operation, maintenance and eventual demolition or reuse.
More consistent and reliable carbon data would support this work. Product manufacturers need support, including access to government funding, to develop environmental product declarations (EPDs). EPDs should provide high-integrity information about the environmental impacts of construction products and inform whole life carbon assessments.
A longer-term regulatory framework would provide further direction. Introducing mandatory whole life carbon assessments and embodied carbon limits into Building Regulations, as proposed by the industry’s Part Z initiative, would establish more consistent expectations across the industry.
The government also has a role in improving understanding among construction professionals and clients. This includes setting out how carbon literacy could be developed and how reporting requirements can be made practical and commercially viable within projects.
Exploring the offsite potential
Improving carbon measurement should be accompanied by practical measures to reduce emissions. For example, modern methods of construction (MMC), particularly offsite manufacturing, offer opportunities to reduce materials waste and improve resource efficiency.
However, concerns about building quality and commercial viability continue to affect confidence in these approaches. Offsite manufacturing relies on sufficient and predictable demand to justify investment in facilities, equipment and skills. An inconsistent project pipeline makes those decisions more difficult, particularly when manufacturers already face considerable cost pressures.
The government could support greater confidence by improving visibility of its public sector construction pipeline and encouraging more standardised approaches to design and procurement where appropriate.
There is also an opportunity to consider offsite construction within a wider approach to materials efficiency and reuse. More precise manufacturing processes can help reduce waste, although the overall environmental benefits depend on factors including materials selection, transport, durability and the potential to reuse components.
Supporting infrastructure for recovering, testing and reusing construction materials could complement efforts to reduce waste during manufacturing and construction.
Confidence and clear direction should guide the Budget
Given the fiscal pressures facing the government, expectations for major new investment in built environment decarbonisation should remain measured.
The immediate priority should be to support the businesses responsible for constructing and maintaining the built environment. At the same time, fiscal constraints need not prevent progress on longer-term decarbonisation policy.
Protecting existing funding, setting out a timetable for decarbonisation interventions, developing a coordinated approach to retrofit and improving consistency in public procurement would all provide a clearer basis for future decisions.
The government may not be able to deliver everything now, but it can give businesses a clearer understanding of what comes next and the confidence to prepare for it.
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