In October’s budget, the Government highlighted the end to the long-standing Energy Company Obligation – with implications for construction industry businesses dealing with retrofitting environmentally responsible solutions. We detail the changes.

The Energy Company Obligation (ECO4) will end on March 31, 2026. ECO4 will be succeeded by the Warm Homes Plan. The Government says that the new Warm Homes Plan will ensure that support for households to invest in environmentally responsible solutions continues.

The new scheme will expand support to include eco initiatives that include multiple measures, rather than simply focusing on one transition per grant. The changes have implications for householders, especially those on low incomes, and for businesses in the construction sector concerned with the retrofitting of environmentally responsible solutions.

How does the Warm Homes Plan differ from ECO4?

The Warm Homes Plan will mean some significant changes for homeowners and for construction industry businesses concerned with retrofitting environmentally friendly solutions.

Changes affecting homeowners include:

Funded through general taxation, not levies on energy bills.
Expanded eligibility (including low-income working households) for the £150 annual energy bill rebate under the Warm Home Discount.

Changes affecting construction industry solution suppliers and retrofitting businesses include:

Support for multiple measures and a “whole house” approach, including insulation, heat pumps and renewable heating.
More flexibility for installers to design tailored energy-saving packages.
Introduction of local authority grants for homes in EPC banks D-G.
Overall funding will be reduced this term from around £20 billion to £15 billion, mainly due to ECO cut.

Why is the Government ending the ECO scheme?

During its thirty years of operation, the Energy Company Obligation (ECO) scheme has helped more than 15 million homes become more energy efficient. Around 5,000 homes a month currently receive measures through ECO4. However, the scheme’s funding mechanism was controversial; paid for by levies added to energy bills.

The government has said that, by scrapping the Energy Company Obligation and transferring Renewables Obligation funding to general taxation, households will save around £150 annually on a typical energy bill. Personal finance expert and founder of Money Saving Expert Martin Lewis welcomed the change. He has long argued that the standing charges on energy bills are unfair and penalise the poorest householders.

What does the change mean for construction industry businesses?

The UK construction industry has reacted with alarm to the government’s decision to cut the £6.5bn Energy Company Obligation (ECO4) scheme, warning of job losses, supply chain disruption and stalled progress on energy efficiency retrofits.

SMEs specialising in retrofitting environmental solutions employ around 10,000 people in the UK. For those businesses that are heavily reliant on ECO contracts, the ending of the scheme will cause significant disruption. Some SMEs have warned of potential job losses without greater clarity from the Government about the successor scheme.

The Government’s plan to replace ECO4 with a new taxpayer-funded Warm Homes Plan was planned to start in April 2025. However, the rollout was delayed. These delays to the Warm Homes Plan have compounded industry concerns.

What is the Warm Homes Plan?

When the Government recommitted to funding the £13.2 billion warm homes plan until 2029-2030 in the June 2025 spending review, the money marked a significant increase on funding for energy-related home upgrades compared to that offered by the previous government.

All homeowners can benefit from the boiler upgrade scheme, which offers £7,500 towards the cost of a heat pump, and those living in the least energy efficient homes can get free loft or cavity wall insulation. Councils and housing associations also receive funding to make upgrades to their properties.

The government has announced that funding for the Boiler Upgrade Scheme, which provides grants of up to £7,500 to subsidise heat pump installations, has been increased next year because of rising demand. This follows an earlier announcement of an extra £50m to ward off the risk of the scheme running out of cash before the end of the current financial year in April.

Position your construction industry business to deliver retrofit work

In the October 2025 Budget, the Chancellor of the Exchequer again reiterated her commitment to the £3.4bn for the Warm Homes Plan over the next three years to improve energy efficiency and decarbonise heating systems.

We hope the Government can manage the transition from the ECO4 scheme to the Warm Homes Plan successfully and seamlessly, so disruption to the sector is kept to a minimum. We would also welcome further funding increases to speed the transition to net zero and support the homeowners and construction industry businesses powering the necessary transition by retrofitting environmental technologies.

Construction industry businesses can access opportunities by partnering with local authorities, housing associations and retrofit delivery schemes that receive Warm Homes Plan grants. Construction industry businesses can also benefit through training subsidies and by becoming approved contractors for schemes like the Boiler Upgrade Scheme and the Warm Homes: Local Grant.

If you’re interested in bidding on government-funded retrofit projects, you’ll need to achieve the following accreditations:

PAS 2035 / PAS 2030 Certification is essential for retrofit projects funded under Warm Homes Plan. It demonstrates compliance with government standards for energy efficiency upgrades.
MCS Certification is required for heat pump and solar PV installations under the Boiler Upgrade Scheme.
TrustMark Registration is a mandatory quality assurance mark for government‑funded retrofit work.