Why is there a hierarchy?
BNG isn't just about compensating for damage — it's about minimising damage in the first place. The mitigation hierarchy ensures that developers first try to avoid and reduce biodiversity impacts, then compensate on-site, then look further afield, and only resort to government credits when all other options are exhausted.
This order is mandatory. A developer cannot jump straight to buying off-site units or statutory credits without first demonstrating that on-site delivery has been fully explored. The Local Planning Authority will assess whether the hierarchy has been followed before approving a Biodiversity Gain Plan.
The three routes
On-site delivery
Create or enhance habitats within the red-line boundary of the development site itself. This is always the first option to explore and the most ecologically valuable.
Off-site delivery
Purchase biodiversity units from registered habitat banks, or deliver habitat creation on your own land outside the development boundary. Used when on-site delivery alone cannot achieve the full 10% uplift.
Statutory biodiversity credits
Purchase credits from the government (via Natural England). Deliberately priced high to discourage use. Revenue funds national habitat creation projects managed by DEFRA.
Developers can combine all three routes. For example: deliver 60% of the BNG on-site, purchase off-site units for 35%, and buy statutory credits for the remaining 5%. The key requirement is that each route is exhausted before moving to the next.
Cost comparison
Understanding the cost differential between routes is critical for project budgeting:
| Route | Indicative cost per unit | Cost for 10-unit shortfall | Notes |
|---|---|---|---|
| On-site | Variable (design costs only) | £10,000–£50,000 | Lowest cost but requires available space and suitable conditions |
| Off-site (private market) | £20,000–£35,000 | £200,000–£350,000 | Market pricing varies significantly by habitat type and geographic area |
| Statutory credits (A1 tier) | £84,000 effective | £840,000 | 2x SRM means you buy 20 credits for 10 units of shortfall |
| Statutory credits (A5 tier) | Up to £1,300,000 effective | Up to £13,000,000 | Very High distinctiveness habitats are astronomically expensive via credits |
The Biodiversity Gain Plan
Regardless of which route (or combination of routes) a developer uses, they must submit a Biodiversity Gain Plan to the LPA for approval before development can commence. The gain plan must include:
- Pre-development biodiversity value (baseline metric calculation)
- Post-development biodiversity value showing the 10% uplift
- Steps taken to avoid and minimise impacts on biodiversity
- Details of on-site habitat creation or enhancement
- Details of any off-site gains allocated from the register
- Details of any statutory credits purchased (with proof of purchase)
- Information about any irreplaceable habitats on the site
The gain plan is a pre-commencement condition — development cannot lawfully begin until it is approved. This is one of the most common delays in the BNG process, so early preparation is essential.
Geographic matching rules
When purchasing off-site units, the trading rules establish a geographic preference:
- Same LPA area — units from the same Local Planning Authority as the development (preferred)
- Same NCA — units from the same National Character Area
- Adjacent NCA — units from a neighbouring National Character Area
Units from more distant areas can still be used but may attract a less favourable weighting. In practice, data from Savills shows that roughly 300 of the first 1,500 allocations were to non-local LPAs/NCAs — indicating that geographic supply gaps are forcing developers to look further afield.
Special cases
Small developments under 0.25 units
If your development needs less than 0.25 biodiversity units to meet the 10% BNG requirement, and the entire site is covered by buildings or private gardens, you can go directly to statutory credits without needing to evidence that you approached off-site suppliers. This simplifies the process significantly for small developments (typically up to around 10 residential units). The cost is usually between £1,000 and £24,000 depending on the baseline.
Irreplaceable habitats
If your site contains irreplaceable habitats (ancient woodland, blanket bog, limestone pavement, etc.), these cannot be offset through the standard hierarchy. Bespoke compensation is required, and statutory credits cannot be used. The LPA will advise on appropriate compensation measures.
NSIPs from May 2026
Nationally Significant Infrastructure Projects will follow the same hierarchy but with additional flexibility to deliver BNG on-site or off-site from the outset, reflecting the unique challenges of large-scale infrastructure. Read our full NSIP guide for details.