The story
From knacker (“one who slaughters and (especially) renders worn-out livestock (especially horses) and sells their flesh, bones and hides”) + -'s + yard.
Etymology from Wiktionary, CC BY-SA 4.0.
knacker's yard
knack·er's yardToday it means: The area of a slaughterhouse where carcasses unfit for human consumption or other purposes are rendered down to produce useful materials such as glue. Full definition →