More than 60 leading operators of serviced offices, business centers and co-working spaces have warned Chancellor Rachel Reeves that recent changes to the business rates system could push thousands of businesses out of business and put jobs at risk across the UK.
In a letter seen by Daily Sparkz, the group, which collectively hosts over 27,000 businesses across the country, expressed “urgent and deeply serious concerns” about what they said was a quiet but dramatic change in the way the government calculates business rates for flexible workplaces.
At the heart of the dispute is a significant change to the Valuation Office Agency (VOA), which has begun treating flexible workspaces as individual properties rather than individual units for valuation purposes. This shift means operators and tenants will be faced with significantly higher bills and tenants will no longer be able to take advantage of important benefits such as: B. Discounts on small business rates.
According to the operators, the reclassification was introduced without consultation and in some cases applied retroactively – with retroactive invoices reportedly totaling up to £400,000.
Jane Sartin, chief executive of the Flexible Space Association (FlexSA), said the change puts the future of many centers at risk: “This sudden reclassification was introduced without consultation and is already putting the future of many jobs at risk. Over 150,000 SMEs are losing the relief they rely on. Many centers are now on the brink.”
She warned that those that survive could be forced to pass on cost increases directly to the small businesses that host them – a move that could further burden SMEs already facing rising taxes, inflation and energy costs.
FlexSA said the VOA had refused to offer guidance or clarity on its approach, adding to the sector’s uncertainty at a time when demand for flexible workspaces remains high.
The VOA has stated that the change follows developments in case law including Prosser v. Ricketts (2024), Cardtronics v. Sykes (2020) and Ludgate House v. Ricketts (2019). Operators argue that these decisions do not apply to serviced offices and accuse the agency of making sweeping policy changes through assessment practices rather than legislation.
There are more than 4,000 flexible workspace centers across the UK, providing the space needed for freelancers, start-ups and growing SMEs. Industry groups warn closures could lead to reduced job availability, undermine entrepreneurial activity and hollow out high streets already struggling to recover from pandemic-era disruption.
The National Enterprise Network, which represents local business agencies, said the changes could “trigger widespread business failures”, adding that the sector was still recovering from the long-term impact of Covid.
Tim Attridge, head of UK ratings at CBRE, said the corporate rates system was outdated and ill-equipped for the modern workplace economy: “Rather than making changes to the methodology now, the VOA should stop aggregating and backdating ratings until the basis of ratings is established through appropriate litigation.”
A VOA spokeswoman told Daily Sparkz that recent case law requires the agency to review the valuation of serviced offices: “Developments in case law have meant that we have had to review the way serviced offices are valued. Many may now need to be treated as a single property depending on contractual arrangements.”
She added that the VOA works with industry representatives but must apply the law based on individual cases.
Operators say the Chancellor must intervene to prevent widespread closures and protect a sector that supports hundreds of thousands of small businesses across the country.
