So here is what I came up with as a backstory for my Squats as well as reasoning how they are still around when the Squat Homeworlds got hit by
Discovered by the Squats during their golden age when they were a part of the Imperium of Man. From their homeworld they supplied the Emperor’s armies with their advanced plasma based technology. In order to continue their expansion and advances in technology the Squat Homeworlds continuously searched for possible worlds to colonize in order to continue their supply of resources.
Midas VI was one such planet, rich in minerals but with a strong magnetic core. It’s heavy gravitational pull made it uninhabitable by humanity at large but to the Squat the gravity was only slightly above what they were used to. Located on the fringes of the galaxy outside what was the Imperium the Homeworlds sent off a small colonization fleet along with the troops to protect them against the unknowns of the fringe.
The Squats landed and colonized Midas VI and for a small time things went according to plan, their new colony prospered and the Squat Homeworlds were close to revealing their success to the Imperium as the Hive Fleet descended on them. Midas VI has been cut off from the Imperium ever since. Unsure of what occurred to the Homeworlds they have been reluctant to seek out contact with the Imperium, fearing they had chosen to continue the war that initially consumed their two races.
As far as they were aware they were the only remnants of the Squat race and thus strive to protect and preserve it at any cost. Having to fend for themselves they adhered to the rules and dogma they had been grown accustomed too. Their foundries and factories crafting new tanks and weapons for their own armies, converting industrial machines where needed.
Once again the Squat had become a race apart from the Imperium, isolated and yet enduring. The Tau emissaries were tolerated by the stoic Squats, they neither joined nor opposed their Greater Good and found in them occasional allies and the two races formed their own trade routes.
In the long years they have been on their new planet they started to reach back to the traditions of their forefathers. As their community grew they expanded downwards into the ground, almost all of the Imperial Architecture above left to the harsh elements of Midas VI. From orbit the planet looks all but abandoned and is mostly ignored by the sentient races.