Why a VAT cut for retrofit is the lever we need

As London prepares to host the NLA Retrofit Summit on 12 November 2025, the urgency could not be clearer: by 2050, roughly 80 % of the city’s existing building stock will need retrofitting if we are to hit net-zero. This creates a twin opportunity - for climate and for the UK construction industry.

For the Chancellor, Rachel Reeves, this is more than an environmental pledge. It is a strategic economic intervention. By cutting VAT on retrofit to high-performance standards (EnerPHit/AECB), she can deliver three outcomes in one: unlock private investment, spur jobs and skills, and drive the retrofit market at scale.

A contemporary low-energy extension to a Victorian home in London, showing how thoughtful retrofit design can enhance comfort, performance, and character.

The case in four parts

1. Super-charging demand
Retrofit is about more than insulation and heat pumps - it’s about transforming buildings to high-efficiency, low-carbon assets. The barrier? Up-front cost, risk and market inertia. A VAT reduction acts like a demand-pull: it lowers cost, increases certainty, and signals that retrofit is mainstream, not niche. As reported, green-business groups are already calling for the government to “axe VAT on building retrofit projects”.

2. Reviving the construction-sector growth engine
Post-pandemic and post Brexit, many parts of the UK construction supply-chain are under stress: skills shortage, materials inflation, thin margins. A VAT cut targeted at retrofit stimulates work at home and commercial retrofit scale, extending workloads, training opportunities and supply-chain resilience. For a studio like RISE, addressing the small-site, developer-led retrofit market becomes viable when the tax regime supports it.

3. Achieving high-standard retrofit (EnerPHit/AECB) = enduring value
A mere “make-do” efficiency job is insufficient. If retrofit is to deliver the long-life, low-carbon asset that policy demands, we must aim for rigorous standards — e.g., the AECB/Passivhaus-derived EnerPHit standard: airtightness, thermal-bridge free design, mechanical ventilation with heat recovery. These standards increase project cost and risk; the VAT cut helps make them cost-competitive versus conventional upgrade or rebuild.

4. Sustainability + resilience + heritage = the triple win
London’s heritage and its existing building stock are its soul. Demolish-and-rebuild is costly, carbon-intensive, and socially divisive. Deep retrofit retains the built fabric, reduces embodied carbon, and keeps districts alive. For London’s built environment community attending the Summit, this is the story: retrofit as adaptive reuse, as resilience, as heritage-respecting sustainability. Cutting VAT signals that the government backs that story.

Why Rachel Reeves should seize this moment

In her role, Chancellor Reeves occupies a unique hinge-point: the fiscal mandate, the green mandate, and the need to boost growth. A VAT cut for retrofit aligns perfectly with all three. Here’s how:

• Fiscal signal: By switching the tax lever, Reeves sends a clear message that retrofit is a priority investment.

• Green growth: It anchors the retrofit market in high value-added, high-skill work - flowing into jobs, apprenticeships, and supply-chain innovation.

• Political credibility: Amid cost-of-living pressures and a need to mobilise on net-zero, a retrofit VAT cut gives a tangible policy win that links climate action with everyday buildings and jobs.

Crucially, the upcoming NLA Retrofit Summit provides a perfect stage. The built environment leadership in London - from local authorities to heritage bodies, designers to main contractors - is gathering to address the retrofit challenge. A VAT reduction policy announcement (or credible signal) at or around the Summit would catalyse momentum across the industry.

How the policy could be structured

• Apply a 0 % or reduced-VAT (5 % or lower) rate to retrofit work that meets an accredited standard (e.g., EnerPHit or AECB Silver/Gold).

• Define eligibility criteria: scope of works (insulation, MVHR, glazing, airtightness improvements), minimum performance targets, certification by a recognised specialist.

• Time-limit the incentive (e.g., three-to-five years) to kick-start volume, with a built-in taper as the market scales.

• Link to skills and supply-chain: attach a requirement that contractors/installer have accredited training or use certified products, ensuring the VAT cut drives industry transformation, not just price lowering.

• Monitor carbon and jobs outcomes: align with national retrofit strategy reporting, showing the tax lever’s value in measurable terms (tons CO₂ saved, jobs created, SME growth).

Addressing likely objections

• Loss of tax revenue: Yes, there is a fiscal cost - but that must be weighed against the avoided cost of future energy bills, avoided carbon penalties, health and productivity gains, and the jump-start to construction growth.

• Regressive benefit: Some argue tax cuts benefit wealthier homeowners. But by targeting retrofit (rather than blanket VAT cuts) and pairing with certification, we ensure the incentive is used for deep-retrofit - not superficial changes - and reaches owners, landlords, social housing providers.

• Complexity of definition and fraud risk: Yes, any tax relief needs careful design. That is why linking to recognised standards (EnerPHit / AECB) is crucial: helps define scope and quality, and simplifies verification pathways.

• Market readiness & supply-chain capacity: Some may argue industry isn’t ready at scale. But that is exactly the point - the VAT cut is the stimulus that builds capacity. The Summit’s focus on skills and supply-chains highlights these issues; policy must lead markets, not follow.

A call to action: Reeves and the retrofit community

As RISE Design Studio, we see the impact on projects every day: owners evaluating deep-retrofit vs rebuild, supply-chains asking for certainty, financiers seeking risk-adjusted returns. For the thousands of small and medium specialist firms across the UK, a VAT cut of this nature unleashes a wave of retrofit investment.

Rachel Reeves: the lever is in your hand. At the NLA Retrofit Summit on 12 November, the built-environment industry will gather, share best practices, grapple with heritage and planning barriers, and commit to scaling retrofit for London. In that moment, make the VAT cut commitment. It will be the signal that deep-retrofit is not optional, and that we are serious about climate, growth and architecture.

Final thought

Retrofit is not a cost. It is an investment in - buildings, in people, in neighbourhoods, and in the planet’s future. By cutting VAT for retrofit to EnerPHit/AECB standards, Rachel Reeves can set off a virtuous circle: regulated performance meets market reality, tax policy meets sustainability, and the construction industry finds renewal in change. At RISE Design Studio, we believe that architecture has purpose, and policy must align to serve that purpose. Let November 12 mark the turning point.

Building for the future

At RISE, we believe that retrofit isn’t just about reducing bills or meeting regulations. It’s about re-imagining the buildings we already have - transforming them into low-energy, high-comfort spaces that last for generations. A VAT cut for deep retrofit would help turn this vision into reality: reviving our streets, empowering skilled makers, and reducing the carbon cost of living.

If you’re thinking about retrofitting your home or building to EnerPHit or AECB standards, let’s start the conversation - and lead the change from within the walls we already have.

→ Email us at architects@risedesignstudio.co.uk
→ Or call the studio on 020 3947 5886

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