United Kingdom Heat Pumps - Market Share Analysis, Industry Trends & Statistics, Growth Forecasts (2026-2031)

The united kingdom heat pumps market size is expected to increase from USD 4.71 billion in 2025 to USD 5.21 billion in 2026 and reach USD 8.87 billion by 2031, growing at a CAGR of 11.24% over 2026-2031. This report is Segmented by Source Type (Air-Source, Water-Source, and Ground/Geothermal Source), Rated Capacity (Up To 10 KW, and More), System Design (Split System, and More), End-User (Residential, Commercial, and More), Application (Space Heating and Cooling, Water Heating, District Heating, and Process and Industrial Heating). The Market Forecasts are Provided in Terms of Value (USD).

United Kingdom Heat Pumps Market Trends and Insights

Government Regulations and Net-Zero Targets

Legally binding 2050 net-zero legislation places heat decarbonization at the center of the United Kingdom's climate strategy, as space and water heating account for 37% of national emissions. The Clean Heat Market Mechanism, introduced in 2024, obliges boiler brands to ensure heat pumps represent at least 8% of annual sales, embedding a compliance cost on gas-only portfolios. The Future Homes Standard, implemented in 2025, requires new houses to cut carbon emissions by up to 80% relative to 2013 baselines, effectively locking heat pumps into all future residential constructions. Combined with the government’s 600,000-unit annual installation target for 2028, these policy levers push manufacturers to redirect R&D away from condensing boilers toward advanced heat-pump platforms. The result is a durable, long-horizon demand signal that anchors the United Kingdom heat pumps market.

Boiler Upgrade Scheme Grants and Other Financial Incentives

The Boiler Upgrade Scheme lifted its air-source grant to GBP 7,500 (USD 9,500) in October 2024, slashing the upfront premium over a gas boiler to GBP 3,000-5,000 for a typical home. Monthly applications rose 88% year-on-year by March 2025, yet the cumulative total still covers less than 7% of the 600,000-unit annual target, underscoring the runway for growth. Additional regional incentives, such as Scotland’s rural grant of up to GBP 9,000, create a north-south uptake gradient, while the Heat Training Grant helps defray installer accreditation costs. Although funding pools have been expanded, grant awareness and installer throughput remain gating factors, suggesting financial sweeteners should continue to stimulate volume in the medium term.

Prevalence of Cheaper Gas-Boiler Replacements

Replacing a gas boiler costs GBP 2,000-3,500 versus GBP 10,000-14,000 for an air-source heat pump, even after subsidies, keeping a sizeable upfront premium that deters cash-constrained households. Behavioural inertia reinforces like-for-like boiler swaps, as many owners act only when a unit fails in winter. Hybrid heat pumps, priced between GBP 6,000-9,000 yet ineligible for grants, further complicate pure electrification by offering an incremental pathway. Because the Clean Heat Market Mechanism targets only manufacturers, installer businesses can still focus on boiler replacements without penalty, limiting near-term conversion in the United Kingdom heat pump market.

Other drivers and restraints analyzed in the detailed report include:

• Rising Electricity-Gas Price Differential Favouring Heat Pumps
• Domestic Manufacturing Scale-up via Heat Pump Investment Accelerator
• Shortage of Qualified Heat-Pump Installers

Segment Analysis

In 2025, air-source systems commanded a dominant 73.83% share of the revenue. Meanwhile, ground-source units are on track to achieve a notable 12.31% CAGR through 2031. Air-source units captured the lion's share of 2025's revenue, because they fit typical U.K. retrofits and qualify for the largest subsidy. Residential customers prize the compact split-system form factor, while light-commercial buyers value inverter compressors that modulate to partial loads. Nevertheless, lifecycle economics increasingly favor ground-source designs in schools, offices, and logistics centers that operate for 20-plus years. Seasonal performance factors above 4.0 shave operating costs by up to 30%. Closed-loop vertical borehole systems overcome urban space limits, and government guidance has simplified planning approval, boosting tender volumes for projects above 200 kW. As heat-network developers bundle shared ground arrays into regeneration sites, the United Kingdom heat pumps market is expected to see ground-source penetration rise steadily through 2031.

Air-to-air technology remains a gray-area niche, with roughly 225,000 units installed by early 2025 but excluded from the Clean Heat Market Mechanism. Removal of that exclusion could accelerate growth, especially in flats where hydronic retrofits are impractical. Meanwhile, the emerging deep-geothermal roadmap identifies Cornwall and the Midlands as long-term hot spots, offering baseload heat for district grids beyond 2030. Investors will watch pilot outcomes closely, as successful demonstrators could open a new vertical within the United Kingdom heat pumps market.

In 2025, units up to 10 kW made up 44.26% of the demand, while systems exceeding 30 kW are projected to expand at a CAGR of 12.78% through 2031. Equipment in the residential scale, particularly those up to 10 kW, underscores the gradual decarbonization trend in detached houses and small terrace homes. In suburban infill projects, 10-20 kW systems are now catering to multi-family blocks, eliminating the need for central plant rooms. This is made possible by using low-profile outdoor units that adhere to noise limits set by permitted developments. The 20-30 kW range is ideal for primary schools, care homes, and convenience retail outlets. Here, the simultaneous demands for space heating and domestic hot water necessitate buffers to prevent short cycling.

Growth is shifting toward systems above 30 kW, especially arrays for district-heating substations and industrial process loops. Daikin’s five-year Greater Manchester framework, covering 64,000 systems, exemplifies volume procurement aligned with local-authority climate plans. High-temperature platforms that deliver 80-100 °C water are displacing gas boilers in food manufacture and paper mills, and the Industrial Heat Recovery Support program co-funds feasibility studies that derisk corporate capital budgets. As a result, the large-capacity slice of the United Kingdom heat pumps market is forecast to outpace the aggregate growth rate through 2031, reinforcing supply-chain moves toward modular, containerized designs.

Complete Report Scope:

• By Source Type
  • Air-Source
    • Air-to-Air
    • Air-to-Water
  • Water-Source
    • Surface Water
    • Open Loop
  • Ground / Geothermal Source
    • Closed Loop Vertical
    • Closed Loop Horizontal
    • Direct Expansion
• By Rated Capacity
  • Up to 10 kW
  • 10-20 kW
  • 20-30 kW
  • Above 30 kW
• By System Design
  • Split System
  • Monobloc
  • Hybrid Heat Pump
• By End-User
  • Residential
  • Commercial
  • Industrial
  • Institutional
• By Application
  • Space Heating and Cooling
  • Water Heating
  • District Heating
  • Process and Industrial Heating

List of Companies Covered in this Report:

• IMS Heat Pumps
• Vaillant Group
• Baxi Heating UK
• Viessmann Group
• Worcestor Bosch Group
• Ideal Heating
• Zehnder Group
• Daikin Airconditioning UK
• Danfoss
• Kensa Heat Pumps
• Mitsubishi Electric UK
• NIBE Energy Systems
• Panasonic Climate Solutions UK
• LG Electronics UK
• Samsung Climate Solutions UK
• Grant Engineering UK
• Glen Dimplex Heating and Ventilation
• Octopus Energy (Home Energy Tech)
• Midea UK
• Stiebel Eltron UK

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support