They did, to an extent; as German bombing switched its focus from RAF airfields to London and industrial targets the Supply Board considered the possibility of underground factories; there was opposition due to the cost and difficulties of constructing underground facilities but four schemes were approved between September 1940 and February 1941. The first, and most successful, used Underground railway tunnels between Leytonstone and Gants Hill. The tunnels had almost been completed when war was declared, and were turned into a Plessey factory for components, fully operational by March 1942. The second was for machine gun manufacture in a cavern in the Midlands, the third was for engine production near Coventry after it was raided heavily; finally, and most ambitiously, there were plans in February 1941 for large underground facilities for the Bristol Aeroplane Company.

To quote Factories and Plant in World War II, "The outcome of the four major schemes showed that, in the main, the reluctance to proceed on large scale underground work was by no means unjustified. They all took longer to complete and cost considerably more than was at first estimated; and the cost far exceeded the cost of an overhead factory of equal size." The Bristol factory in particular proved expensive and complex, and took until September 1943 to deliver its first engine. Long before that point the German bombing of Britain had been scaled back, and though the threat never entirely diminished the resources demanded by underground factories were simply too great for the benefits returned.

The Germans new everything about our factories above ground and they would have known where any underground factories would have been located, there were spy's everywhere. Its unlikely Britain would have had the manpower at the hight of the war to construct huge underground factories and relocate equipment.

Hey there,

Just to let you know, your question is fine, and we're letting it stand. However, you should be aware that questions framed as 'Why didn't X do Y' relatively often don't get an answer that meets our standards (in our experience as moderators). There are a few reasons for this. Firstly, it often can be difficult to prove the counterfactual: historians know much more about what happened than what might have happened. Secondly, 'why didn't X do Y' questions are sometimes phrased in an ahistorical way. It's worth remembering that people in the past couldn't see into the future, and they generally didn't have all the information we now have about their situations; things that look obvious now didn't necessarily look that way at the time.

If you end up not getting a response after a day or two, consider asking a new question focusing instead on why what happened did happen (rather than why what didn't happen didn't happen) - this kind of question is more likely to get a response in our experience. Hope this helps!