End of the Green Deal - What Does This Mean for the Construction Industry?

End of the Green Deal - What Does This Mean for the Construction Industry?

06th August 2015

According to recent news reports, the government has “pulled the plug” on funding for the Green Deal initiative and says that no further money will be handed over to the Green Deal Finance Company (GDFC) which organises loans for the scheme. In a further development, no further money will be released for the Home Improvement Fund though the government does say that it will work with the construction industry and consumer groups on a value for money scheme to make homes more energy efficient in future.

The Green Deal was set up in July 2013 to give financial help to householders to make energy saving improvements to their homes. The scheme covered such areas as:

  • Property assessment
  • Finding companies to carry out the work
  • A range of payment options in the shape of a Green Deal loan or the Green Deal Home Improvement Fund

It seems that this is an initiative that held so much hope but it barely got off the ground before being axed, so what exactly went wrong? A Green Deal loan in order to pay for energy improvements like cavity wall and loft insulation would be granted and then paid back through savings made on a household’s electricity bills. However, applying for and getting the loan involved a complicated procedure to start with. Then, the interest rates were fairly steep (7 – 10%) and there was no actual guarantee that the savings made would be enough to make the repayments. Another off-putting factor was that the loan was linked to the property rather than to the householder.

This is not the first green policy that the government has dropped, there are others such as solar farms, offshore wind projects and zero carbon housing, and the government is now being accused of waging a war on green initiatives. It’s becoming difficult to see how the government will fulfil its legal obligation to EU climate change targets and its obligation to future generations. It’s also quite bad news for the construction industry as a whole as the Green Deal looked set to provide a tranche of job opportunities and export opportunities with a world-leading retrofit industry.

Industry pundits are accusing the government of bringing about policy changes that are destroying market innovation, operating business and investor confidence. The UK’s ability to drive a strong agreement at COP21 will also be adversely affected. Although the Green Deal had some teething problems, it was getting off the ground in recent months and was finally becoming established as a sound way of enabling households to install energy saving measures without paying upfront costs.

What this will mean for the construction industry in the long term remains to be seen. However, it’s created regulatory uncertainty that will make it difficult for companies to plan ahead and act proactively in order to ensure compliance ahead of deadlines.

Energy and Climate Change Secretary Amber Rudd claims that the government will establish a new scheme to promote domestic energy efficiency but admits that there is no immediate replacement for the Green Deal.