Cavity walls have an outer skin, an air gap, and an inner wall.  The main purpose was to prevent rain water soaking through and the cavities were ventilated to discourage condensation.  The gap allows air to circulate, taking warmth from the inner skin and transferring it to the outer skin.  Adding insulation to the gap, keeps the air (a good insulator), but stops it moving around, so much less heat is lost.  Modern blown in insulation systems are quite easy and cheap to install, and probably, along with loft insulation, represent the best value home improvement you can invest in.

Link to Energy Saving Trust guide to cavity wall insulation

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