According to data from the European Heat Pump Association (EHPA) heat pump sales have fallen by an average of 23% in 13 European countries in 2024 compared to 2023. Conversely, the UK saw a 63% increase in hydronic heat pump sales in 2024 (98,468).
The European data warns of potential risks to the UK’s heat pump industry. The EHPA attributes the decline to changes in government support, the cost-of-living crisis, and the low subsidised price of gas. The fallout has led to 4,000 job losses in the sector.
In response, the UK’s Heat Pump Association (HPA) urges the government to sustain current support schemes like the Boiler Upgrade Scheme and the Energy Company Obligation, further invest in UK manufacturing, and continue to support the growth of a skilled workforce. These measures, it says, will ensure the growth momentum continues and that consumers have access to affordable clean heating.
ACTION PLAN
The HPA calls for a clear, credible heat decarbonisation plan with detailed installation pathways, backed by policy and regulatory support.
“The UK market is currently a lot smaller than the European market and, even though we’ve seen huge growth, we’re coming from a small starting point,” says Olivia Smalley, HPA’s head of policy and communications. “The declines seen across Europe could follow overseas unless we see a continuation of government support, clear messaging and investment signals.”
Iain Bevan, new business director – renewable heating at Daikin UK, agrees, saying that the steady growth seen in the UK in recent years was nowhere near that seen in the European market.
“A couple of years ago, Italy had a ‘Super Bonus’ scheme where consumers could potentially make money,” Bevan says. “But the Italian Government throttled it back and have virtually stopped it, so the demand for heat pumps dropped overnight.
“The Dutch Government had been promoting low carbon fuels over fracking for gas and so heat pumps and hybrid systems were being installed. But a new, more right-wing government was voted in which decided to no longer support those policies. Incentives were changed and policies cancelled, which had a big impact on the market there.
“With sensible policies and steady growth we can continue to grow, but we need to grow quicker if we want to hit the Committee on Climate Change target of 1.5 million heat pumps per annum by 2035.”
Geopolitical factors also play a role, according to Mathieu Canal, heat pump solutions director at Danfoss: “Prior to the Russian invasion the market was quite stable with a steady growth of 5% year on year, but afterwards the price of gas went up so there was a rush to instal heat pumps. Since 2023 the price of gas has come back down, so it’s not as attractive.”
Smalley adds that concerns have been raised regarding the sector’s capacity to manufacture the increased number of heat pumps which will be driven by the introduction of the Future Home Standard.
“The HPA represents manufacturers supplying around 90% of heat pump product on the UK market,” Smalley explains. “And they are confident they have the capacity to support both the Future Home Standard’s scale up of demand and expected growth in the retrofit market.”
The Government’s recent Heat Pump Investment Accelerator Competition, awarding £30m to boost UK manufacturing, demonstrates its commitment to strengthening the domestic supply chain, Smalley adds.
POLICIES
According to the HPA, clear policy direction is essential. “We’ve had no response to the consultation on the Future Home and Buildings Standard that was expected to be in place by 2025,” states Smalley. “That will be a clear signal from government for manufacturers to invest as well as existing gas boiler engineers to move into installing heat pumps and we can expect this to drive demand.”
Bevan agrees, saying that the government must confirm the Future Homes Standard soon, expecting it this summer.
“There are a number of options at the moment,” Bevan says. “They need to be finalised so house builders can start preparing, designing, and organising supply chains. The number of new builds with non-fossil fuel heating systems will certainly help towards the 2035 target.”
Canal emphasises the importance of maintaining the Boiler Upgrade Scheme for market stability. Unlike the fluctuating support in Europe, long-term planning is key.
“The government is due to publish a Warm Homes Plan,” Smalley says. “This must set out a credible and deliverable pathway, with clear, trackable milestones setting out how and when the UK will transition to low carbon heating, how oil and gas workers are going to be supported during the transition and provide clear signals to the sector to scale up.
“With that clarity we should see the market ramping up, with an increase in installers choosing to become qualified to instal heat pumps and, consequentially and crucially, an increase in consumer demand.”
The government has also launched the ‘Warm and Fuzzy’ consumer campaign and appointed Miatta Fahnbulleh as the first Minister for Energy Consumers to prioritise consumer engagement.
“This shows they are focussed on putting consumers at the heart of the transition,” Smalley says. “We want consumers to feel like it’s their choice, not that it’s being forced upon them.”
SPARK GAP
The “spark gap” – the cost difference between electricity and gas – remains a major barrier. UK gas is about four times cheaper than electricity, deterring consumers despite heat pumps’ superior efficiency.
Bevan says: “If we can bring the spark gap down, or at least bring it closer, it becomes a much easier decision for consumers and specifiers. Whichever way you look at it, we must see a smaller spark gap, but it’s not straightforward, we must produce a sensible way to balance those costs.”
Energy suppliers and manufacturers are introducing heat pump-specific tariffs to reduce electricity costs. Smalley calls for a consultation to be published on reducing electricity prices, noting the misalignment with the goal of electrification set out in February’s Climate Change Committee’s ‘Seventh Carbon Budget.’
“We welcome a swift consultation, setting out the options for reducing the price of electricity relative to gas,” Smalley says. “It’s counterintuitive to the electrification of home and transport, as laid out in the Climate Change Committee’s Seventh Carbon Budget, if electricity is artificially priced higher than gas.”
PLANNING AND TRAINING
A further barrier is planning permission. Octopus Energy reports that 27% of its customers face planning barriers when installing heat pumps. Changes announced in 2024 have yet to take effect.
Smalley anticipates that once implemented, these changes will eliminate some unnecessary costs and delays. Additionally, heat pumps can enhance grid resilience by adjusting energy use based on supply and demand.
Canal says: “Heat pumps can be programmed to adjust to the variable price of electricity on days where there’s no sun or wind to days when there’s lots of sun and wind. They can be used to store energy as well as provide it back to the grid depending on demand.”
The situation is different in Europe according to Canal: “Installing a heat pump in Germany costs twice as much as in the UK, so I hope the UK makes it as easy as possible to instal. Boilers are easy to instal so heat pumps should be easy to instal too.”
Bevan says that there needs to be a hearts and minds approach to not just educating consumers on the benefits of heat pumps but installers too. He says: “There’s still a lot of focus on gas boilers and qualifications, we need to train them not just on installing heat pumps but on speaking to customers about offering them the choice of a heat pump or low-carbon heating system and the benefits they can bring.
“The installer base is where a lot of people go when they need a new heating and hot water system, that sector needs to put the option on the table and be confident enough to talk about why they should consider that option.”
Daikin offers training to help installers expand their skills and their business potential.
In 2024, over 9,000 individuals completed recognised heat pump qualifications in the UK, which Smalley says points to a real interest in people wanting to become heat pump engineers. The problem again comes down to clarity from government and clear investment signals to grow demand, she says: “There are things that the government can do to grow demand so that when people have been trained, they can find work easily.”
Change could be on the way soon, depending on the outcome of several expected policy developments between government, the HPA and its partners, such as Daikin, specifically on the Future Home Standard and addressing the disparity in price between electricity and gas.
Bevan says: “The sooner we do that the sooner the sector can get on. Once all new builds require a non-fossil fuel system then all those installers will have to go and get trained on heat pumps and how to instal them, and those installers will go on to work in the retrofit sector.”
Canal concludes: “What’s most important is to have a steady framework over a long period of time that is easy to access and is not tied down in bureaucracy so the vision is clear for industry and the consumer.”