BNG Adjustments: What They Really Mean for the Market
Following last week’s Government announcements on Biodiversity Net Gain (BNG), we wanted to take a moment to digest the detail and share a perspective focused on what this means for the market - particularly for developers and habitat banks.
Overall, we’re broadly supportive of the direction DEFRA and Natural England have taken. Any functioning market evolves through iteration. These changes feel like refinement - learning from the first two years of BNG in practice.
1. LNRS replacing NCA/LPA in the Spatial Risk Multiplier
This one is particularly interesting for the offsite BNG market. Moving from ~159 National Character Areas (NCAs) to 48 Local Nature Recovery Strategy (LNRS) areas effectively widens what qualifies as “local” for offsite delivery.
On the surface, this increases optionality for developers — more habitat banks available without SRM penalties. It also makes the system easier to explain; LNRS areas broadly align with recognisable geographies (e.g. counties), unlike NCAs.
But the nuance matters.
With over 250 habitat banks now in the market, we were already approaching 1–2 per NCA. Under LNRS, that could become 6–8 competing providers within a “local” zone. The likely outcome is increased competition — downward pressure on pricing and more structured bidding environments.
Good for developers. Potentially more challenging for habitat banks.
There’s also a behavioural question: will LPAs double down on true local delivery? If “local” now stretches further, we may see more requests for within-LPA units as a preference, even if not formally required. We already see this happening, so this trend may well increase.
It’s also worth noting that some commentary has suggested the move to LNRS removes the Spatial Risk Multiplier altogether. As I understand it from discussions with Natural England, this is not the case. The multiplier will still apply where units are sourced from adjoining LNRS areas or further afield (i.e. “rest of England”). In practice, this remains important — some unit types will be scarce locally and will still need to be delivered at a distance.
2. The 0.2 hectare threshold
As I wrote back in December, this is a sensible adjustment.
BNG has always been disproportionately complex for very small sites. Developers buying 0.01–0.05 units face the same administrative burden as those buying 10+ units — which was never efficient. Arguably, a fully digitised system could have solved this, but in its absence, this change makes sense.
Our internal analysis supports the Government’s approach:
A 0.5ha threshold would have removed ~40% of leads, but only ~13% of unit sales
The confirmed 0.2ha threshold affects ~32% of leads, but <8% of unit demand
In short: fewer enquiries, but minimal impact on overall market volume.
This is a lead-quality improvement, not a material reduction in demand.
3. Removal of the self-build exemption
This feels like a clean-up exercise.
The exemption was difficult to enforce and created ambiguity. Its removal simplifies the system. In practice, many of these sites will now sit under the 0.2ha threshold anyway, so the real-world impact is limited - but clarity improves.
4. NSIPs delayed to November 2026
There’s understandable frustration around timelines shifting, but the scale of NSIPs likely justifies the Government wanting to get this right.
From a market perspective, this is important: NSIPs represent significant potential demand (we’re already seeing early requirements of 500–1,000 units per project). But the buying cycle is still unknown.
Will units be secured pre-planning?
How long will deal cycles be?
How bankable is this demand in the near term?
For habitat banks, the opportunity is real - but patience will be required.
5. Brownfield consultation
Too early to draw firm conclusions. But if exemptions expand meaningfully here, this could chip away at urban demand for units over time.
Final thought
None of these changes fundamentally alter the direction of the BNG market. But they do shift how it behaves:
Potentially more competition between habitat banks
Cleaner, more efficient SME developer engagement
Longer-term (but larger-scale) infrastructure demand
We’re moving from early-stage friction into a more mature, competitive market.
That’s a good sign.
If you have questions about any aspect of Biodiversity Net Gain don’t hesitate to call our team on 0203 105 0776.