DEFRA’s consultation on BNG, published on 28th May, may initially appear unsettling to those creating or selling units. However, the consultation is not as straightforward as it may seem at first glance. There is in fact far more good news than bad.
1. The consultation confirms that Labour are committed to the continuance of the BNG scheme. It is here for the foreseeable future.
2. BNG will continue in its current form. It will not for example, be converted to a tariff system as proposed for the Nutrient Neutrality scheme set out in the Planning and Infrastructure Bill 2025.
3. The ideas proposed are merely just that, and not all of them will be adopted.
4. The exemption for smaller sites will affect the current market. However, these sites, in our opinion, were never going to be the future of the BNG market. Their current prominence is merely a product of the emerging nature of the market. BNG has only been mandatory for a little over a year and we are still in the hiatus period waiting for further demand as developments increasingly obtain planning permission for applications submitted after February 2024. We have also, for some time, felt the current high level of mitigation on larger development sites is going to be sustainable.
5. The consultation published in respect to the idea of an exemption for small sites refers to it potentially affecting 80% of BNG transactions. If adopted, this is not as daunting as it may seem due to these allocations usually involving microtransactions with fractions of units involved rather than large individual sales.
6. Based on our own analysis of the information available from the Natural England Register, so far, approximately 360 area units, 4.72 hedgerow units, and 0.53 watercourse units have been sold. The number of units per sale range from 0.01 to 58.39 units.
Since BNG is still in its infancy as a market, the small number of transactions and any conclusions drawn in respect to the long-term effect on the market should there be an exemption to small sites could be being over played. 80% of allocations being attributed to small sites could be explained through the general frequency and spontaneity of such developments, while medium to larger sites may take longer to obtain planning permission, it should not be forgotten that larger sites can take years to plan prior to submitting for planning.
In the weeks running up to the 12th of February and the introduction of mandatory BNG, medium and large-scale developers would have been submitting applications on mass to avoid the new requirement.
Following this wave of applications, these same developers will be making amendments, to any plans submitted before February 2024 and will only start on new projects that much further down the line.
This will have an impact on demand and may change the percentage of small site allocations to a much smaller percentage of allocations.
7. Further good news is that Nationally Significant Infrastructure Projects will shortly be brought under the BNG framework. One proposal is to allow the use of offsite mitigation units as an initial option, rather than looking at providing onsite habitat first. This will increase the demand for offsite units. This is also to avoid overuse of Compulsory Purchase powers extending the “red line” to satisfy the BNG requirement. The second idea is to require temporary works to be subject to 10% gain.
Although slightly delayed until May 2026, we expect the corresponding increase in demand will make up for most losses should an exemption be given to small sites.
8. Other good news is also the idea of watering down the hierarchy in respect to spatial weighting. As in the proposals there is a suggestion that trading can be done off the Local Nature Recovery Strategy areas rather than the LPAs (National Character areas will still be part of the spatial weighting trading rules). Using the LNRS areas as a trading “zone” would enable one habitat bank to trade to six times the land area with none of the spatial weighting, which is a very positive opportunity for vendors to reach a greater number of developers, particularly those in a more urban setting.
We feel there is more good news than bad for the BNG marketplace in the long run.