Cuts to £6.5bn scheme will hit poorest and cause chaos for SMEs installing insulation and solar panels

The ECO scheme is funded from private sector cash and delivered largely by SMEs. It installs fuel poverty measures in approximately 5,000 homes a month (equating to around 58,000 a year) and delivers £1.3 billion a year in energy efficiency works, benefiting low-income households battling fuel poverty or those who need upgrades to reduce the health risks from living with damp, mould or draughty homes.

It would have delivered £6.5 billion of investment over this parliament, upgrading over 288,000 homes owned or rented by some of the poorest households, making it one of the most successful fuel poverty interventions in recent years.

The move was dressed up in yesterday’s Budget as a "saving" that would cut £150 off every energy bill - a figure heavily disputed by experts that is more likely to be closer to £48 (£1.3bn in annual ECO spend / 27 mn households = £48). However, what is not disputable is that it is a highly regressive move that saves the taxpayer nothing and which has already caused chaos in the brittle supply chain of engineers and insulation manufacturers helping fix Britain’s damp, mouldy and draughty housing stock.

Ministers want to instead combine the private sector ECO scheme with another, entitled the Warm Homes Plan - a troubled initiative using public cash and suppliers that go through complex public procurement. The Warm Homes Plan was due to start in April of this year but has been delayed due to bungling from officials, which means cancelling ECO now will cause chaos in a brittle supply chain that demands certainty.

With the ECO scheme planned to be cut in March 2026, and the replacement Warm Homes Plan not yet in place, there is no like-for-like successor, no delivery mechanism, and no continuity for homes or workers. This amounts to a withdrawal of £5 billion in retrofit funding, affecting an estimated 222,000 future retrofit projects that would have cut bills for low-income households.

Anna Moore, McKinsey’s former head of UK construction and now a founder at Domna, a retrofit company working with major housing associations, social landlords and councils to upgrade thousands of homes, is calling for ECO to be extended for at least 12 months to ensure an orderly transition. Moore wants cash to be ring-fenced for low-income households and will write to Energy Secretary Ed Miliband to request a greater level of joined-up thinking in Government.

Joel Pearson, director at Net Zero Renewables, a Newcastle-based solar panel installer, said:

“We employ and subcontract over 35 skilled individuals, and have helped take more than 200 homes out of fuel poverty through the ECO scheme. I would urge Rachel Reeves to think again and to at least extend this existing scheme by a year so we can see an orderly transition and support firms like ours helping to mitigate climate change.”

Lee Rix, Managing Director at Eco Approach, a Preston-based installer, said: 

“Each year our 150+ staff and supply chain use ECO4 funding to make cold, inefficient homes safer and more affordable for thousands of families in fuel poverty. With no transition plan, ending ECO4 risks leaving those families abandoned and undermining the workforce that supports them – we urgently need clarity on a successor scheme.”

Anna Moore, CEO and founder at retrofit consultancy Domna, said:

"It makes sense to streamline grants and increase oversight. The Warm Homes Plan is a welcome initiative. However, suddenly yanking £1.3 billion in funding is chaotic, and has created a cliff edge for thousands of low-income households in fuel poverty as well as SMEs employing some 10,000 people. With fuel poverty growing and business under pressure, it beggars belief that a successful scheme funnelling utility firm funding to the poorest households in society should be brutally cut. And for what? To create a few short-term headlines around cutting Net Zero levies.

"This fundamentally goes against Labour’s stated values of wanting to help the poor and to fight climate change. This is not the moment to pull up the ladder. Bridging ECO to the Warm Homes Plan is essential if we are to protect residents, protect jobs and protect progress. Right now, we risk losing the installers, coordinators and surveyors - those SMEs who have built up capability over a decade, and whose expertise we critically need. Companies cannot simply be switched back on later like a light switch and the ramifications of this could massively undermine our wider battles to fight climate change and upgrade our ageing housing stock.

"We need clarity and continuity. Extending ECO by one year allows an orderly transition while the Warm Homes Plan is finalised, piloted and mobilised. Without that extension, the sector falls off a cliff in March 2026 and we will be rebuilding capacity from scratch at exactly the moment the government needs to accelerate delivery."