Autumn Budget: retrofit faces setback as defence spending prioritised

Ambitions to improve the energy efficiency of the UK’s existing buildings have faced a setback after the government cut funding for home upgrades as part of its Autumn Budget.

The Budget confirmed a £1 billion reduction in capital grant funding for the Warm Homes Plan, with the savings contributing towards the government’s Defence Investment Plan. The reduction forms part of a wider reprioritisation of spending for the Department for Energy Security and Net Zero (DESNZ), which will also see £500 million saved from hydrogen projects and £200 million from carbon capture, usage and storage. The government has stated the Boiler Upgrade Scheme would continue to receive £400 million in 2027–28, with funding rising broadly in line with inflation thereafter, but this still represents a cut from what was previously announced.

BCIS chief economist Dr David Crosthwaite said the changes raised questions about the pace at which the UK could adapt its existing building stock. ‘The need to strengthen national defence is clear, but the reduction in funding for home energy efficiency measures presents another challenge for retrofitting the built environment,’ he said.

‘Improving the performance of existing buildings is a substantial undertaking, requiring long-term investment, specialist skills and a supply chain with confidence in future demand. Reducing the funding available for these projects risks slowing delivery at a time when the industry needs to build capacity and develop more efficient ways of carrying out retrofit work.

‘Of course, balancing competing national priorities is never straightforward, particularly in the current economic climate. However, it is important that short-term spending decisions do not undermine the long-term investment needed to improve the UK’s existing building stock.’

The Warm Homes Plan is intended to support improvements such as insulation, low-carbon heating and other energy-saving technologies, helping households reduce energy consumption and improve the performance of their homes. The government said most funding for low-income households and social housing, delivered through mayors and councils, remains protected. However, the changes introduce uncertainty over the scale and timing of future investment in energy efficiency improvements.

The latest government figures indicate a slowdown in retrofit heat-pump installations. DESNZ statistics show that 20,895 heat pumps were installed in existing UK homes during the first half of 2026, a 22% reduction compared with the same period in 2025⁽¹⁾. Although installation volumes have increased significantly over the longer term, the latest figures highlight the challenge of maintaining momentum as the industry works to expand its capacity to deliver low-carbon heating upgrades.

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^{(1) GOV.UK – Heat pump deployment statistics: June 2026 – summary – here}