BNG de minimis exemption being misused to avoid compensation obligations worth £106m/year

The Lifescape Project has commissioned Economics for the Environment Consultancy (eftec) to assess how planning applications have been using BNG exemptions and to assess how changing size thresholds or exemptions could impact the market.

The report is available as a PDF download

“As a responsible body, Lifescape are fully invested in ensuring that the BNG market functions properly and we see it as a key tool to drive more funds into nature restoration. However, we have had concerns for some time about its poor implementation and more recently about the changes proposed in the May 2025 consultation on small sites, which in a worst case scenario results in £106m of lost biodiversity finance per annum.”
— Adam Eagle, CEO, The Lifescape Project

Taking data from the Planning Portal, eftec analysed how exemptions were being used during the period from March 2024 to February 2025. 87% of planning applications were considered exempt from BNG. The use of exemptions by local authority area varied but most (95%) registered an exemption rate of over 70%.

The de minimis exemption was the most commonly used exemption (56% of all applications). This exemption is available to those applications that “do not impact a priority habitat and impact less than 25 square metres of onsite habitat and 5m of linear habitat.” There is no legal obligation to provide evidence to support this claim when a planning application is submitted and no requirement on local planning authorities to request evidence to support it.

Eftec conclude that the number of applications relying on the de minimis exemption is higher than expected by the data. De minimis is being claimed by approximately 40% of developments over 0.5ha in size, and a de minimis impact on nature for sites of this scale is not credible in all but a tiny number of exceptional circumstances. The report concludes that there “may be a widespread compliance failure within the BNG system. This may be due to it being genuinely poorly understood or monitored or intentionally misused.”

Eftec have run various scenarios to evaluate how changes to BNG policy might impact BNG. One of these scenarios mirrors the proposal by the government (Defra, 2025) to fully exempt all sites under 1ha from BNG requirements (see Scenario 4 of the report and Option 2 of the 2025 Defra consultation). Eftec’s analysis demonstrates that Option 2 would roughly halve the size of the biodiversity unit market, compared to its intended size.

The most effective way to strengthen BNG policy for small sites will be to lower the threshold for full exemption to 0.1ha sites (see Scenario 2 of report). This would significantly enhance biodiversity compensation and also reduce the administrative burden on planning authorities by making it easy to verify and check.

“We have a BNG policy that can deliver huge gains for biodiversity and nature restoration that other countries are already looking to emulate. We need to ensure that early market confidence is not threatened by changes to BNG in the wrong areas, such as the 1ha exemption proposal. Instead, we need to focus on making this policy work better to unlock more private investment in nature markets. The 0.1ha exemption proposal, based on site size and not impact, would be a significant step forward for biodiversity outcomes, whilst not adding to the administrative burden on local authorities.”
— Amelia Holmes, Rewilding Economist, The Lifescape Project

If the issues with small sites are not addressed, eftec conclude that developers will continue to avoid compensation obligations worth £106m/year. This is in addition to the future wildlife management costs that will fall on taxpayers, which are estimated to be £155m to 2035. Eftec’s report shows how a reframed de minimis exemption (0.1ha and based on area) will help restore confidence in the BNG regime by preventing abuse whilst ensuring that there is a proportionate application of BNG across all development types.