On October 15, 2025, the United Kingdom’s ambitions to lead in home energy efficiency suffered a major blow as the National Audit Office (NAO) published a damning report into the government’s Energy Company Obligation (ECO) scheme. The findings were nothing short of alarming: an astonishing 98% of homes with external wall insulation installed under the ECO program now require urgent repairs to address major issues—primarily damp and mould—that threaten both the health of residents and the integrity of the nation’s housing stock.
The ECO scheme, first launched in 2013, was designed to tackle fuel poverty and reduce carbon emissions by obligating energy suppliers to fund energy efficiency upgrades for low-income households. The latest iteration, ECO4, runs from April 2022 to March 2026 with a budget of £4 billion, aiming to deliver deep retrofits for the least energy-efficient homes. But according to the NAO’s comprehensive investigation, the scheme’s implementation has been plagued by poor-quality installations, weak government oversight, and an inadequate consumer protection system.
“ECO and other such schemes are important to help reduce fuel poverty and meet the government’s ambitions for energy efficiency,” Gareth Davies, head of the National Audit Office, told the press. “But clear failures in the design and set-up of ECO and in the consumer protection system have led to poor-quality installations, as well as suspected fraud.”
The numbers are sobering. Around 22,000 to 23,000 homes with external insulation and between 9,000 and 13,000 homes with internal insulation—representing 29% of such installations—now need repairs. The NAO estimates that between 900 and 2,000 residents with external insulation, and 300 to 1,400 with internal insulation, face possible immediate health risks. These risks stem from issues like exposed live electrical cabling and blocked boiler ventilation, not just the expected damp and mould. The cost of correcting faulty external insulation ranges from £5,000 to £18,000 per house if caught early, but can spiral into the hundreds of thousands if left to fester, according to quality monitoring company TrustMark.
How did it come to this? The NAO points to a cascade of failures. The Department for Energy Security and Net Zero’s (DESNZ) consumer protection system, established in 2021, failed to detect significant installation quality problems until late 2024. Oversight was described as weak, monitoring insufficient, and the consumer protection process overly complex and fragmented between DESNZ, Ofgem, and private certification bodies. The result: not only did shoddy installations slip through the cracks, but some businesses even managed to “game the system.”
Fraudulent activity compounded the crisis. In November 2024, Ofgem estimated that businesses had falsified claims for ECO installations in between 5,600 and 16,500 homes, with potential fraud totaling £56 million to £165 million. The NAO report urges DESNZ to take clear responsibility for ECO schemes, clarify its approach to repairing faulty installations, and reform the consumer protection system for retrofit schemes. Annual reporting on fraud and non-compliance is also recommended.
Architects and industry experts have not held back in their criticism. James Traynor, managing director of ECD Architects, called the situation “an unnecessary failure in a vitally important sector caused by a rushed scheme, poorly implemented.” He lamented that “the lessons of previous failures identified in the Each Home Counts report (2016) were not learnt,” pointing to the lack of property-specific design and technical scrutiny as fatal omissions.
Michael Collins, founder of Michael Collins Architects, echoed these concerns, highlighting a fundamental disconnect between the skills required for installation and the current capabilities of the UK construction industry. “We desperately need low-carbon upskilling at a granular level if we are to be serious about future initiatives,” he said, warning that future government ambitions could be hamstrung by the same lack of preparation.
The NAO report also revealed the perils of a one-size-fits-all approach. Ewan Imrie, director at Collective Architecture, said the “genuinely shocking” 98% rate of major issues underscores the need for a “proper design methodology based on an understanding of building physics,” continuous monitoring, and robust specification. “We cannot afford to retrofit these buildings twice,” Imrie cautioned, noting that about 75% of the UK’s current building stock will still be standing in 2050. The stakes for getting this right are, quite literally, generational.
Energy minister Martin McCluskey did not mince words in response to the NAO’s findings. “Today’s report shows unacceptable, systemic failings in the installation of solid wall insulation in these schemes, which have directly affected tens of thousands of families,” he said. “People should not be expected to navigate a complex web of organisations when they want to improve their homes – and with this government, they won’t. We are fixing the broken system the last government left by introducing comprehensive reforms to make this process clear and straightforward, and in the rare cases where things go wrong, there will be clear lines of accountability, so consumers are guaranteed to get any problems fixed quickly.”
Others have called for more fundamental changes. Rob Harris, director in Civic’s building services engineering and sustainability team, stressed the need for better selection and validation of materials, improved training and certification for installers, and an integrated approach to ventilation and moisture control. “Quality control must be effective and robust, and feedback must be integrated into the process to support ongoing improvement and capture lessons learned,” Harris said.
Mike Leonard, visiting professor at Birmingham City University’s Centre for Future Homes, warned of the reputational damage to the construction industry and the misery for home occupiers. “Trust and confidence are at an all-time low, and in the absence of decisive action to find and fix the root cause, we are condemned to repeat the mistakes of the past,” he remarked, calling for a comprehensive review of funding and delivery and greater involvement of local, small businesses.
Simon Wyatt, partner-sustainability at Cundall, emphasized the urgency of addressing fuel poverty while meeting climate targets. “The Energy Company Obligation scheme was poorly conceived and executed, with many warnings from the outset that it would fall short of its objectives,” Wyatt noted. He advocated for a centralized program focused on large-scale home insulation and the electrification of heat, arguing that such an initiative would reduce emissions, alleviate fuel poverty, and create thousands of green jobs.
Anna Moore, co-founder and CEO of retrofit specialist Domna, pointed out that the contractors responsible for the ECO debacle are now delivering the Warm Homes Plan. “The NAO’s report makes for grim reading, as energy efficiency upgrades to our housing stock are essential but have typically been marred by poor oversight and an inability to effectively deliver earmarked funds,” she said. Moore called for the government to redirect resources to site-based inspection teams, enforce existing standards, and channel ECO funding through managing agents rather than directly to contractors.
The NAO’s report is a wake-up call for the UK’s retrofit ambitions. As the government scrambles to fix systemic flaws, the hope is that the lessons of ECO’s failures will finally be heeded—before more homes, and more families, pay the price.
