Cavity wall insulation with a Pre-Cast Flue

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I have a Pre-Cast Flue with a gas fire, and a ridge / tile vent on the roof. The property is not insulated at the moment and I am looking to get the cavity wall and loft insulated. (hopefully for free via a grant)

The wall upstairs above the fireplace can get fairly hot to the touch if the fire has been on a while. Is this likely to cause a problem with cavity wall insulation? I know that commonly Carbon coated polystyrene beads are used in cavity walls, and well.. polystyrene melts..

Thanks
Dec
 
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