More than 60 leading operators of serviced offices, business centres and co-working spaces have warned Chancellor Rachel Reeves that recent changes to the business rates system could force thousands of companies to the brink and place jobs across the UK at risk.
In a letter seen by Business Matters, the group, which collectively hosts over 27,000 businesses nationwide, expressed “urgent and deeply serious concern” over what they described as a quiet but dramatic shift in how the Government calculates business rates for flexible workspaces.
At the centre of the dispute is a major change by the Valuation Office Agency (VOA), which has begun treating flexible workspaces as single properties for rating purposes rather than as individual units. This shift means operators and occupiers face significantly higher bills, and tenants can no longer claim key reliefs such as small business rates relief.
According to operators, the reclassification has been introduced without consultation, and in some cases applied retroactively — with backdated bills reportedly reaching up to £400,000.
Jane Sartin, executive director of the Flexible Space Association (FlexSA), said the change was placing the future of many centres in jeopardy: “This sudden reclassification has been introduced without consultation and is already putting the future of many workspaces in jeopardy. Over 150,000 SMEs are losing the reliefs they depend on. Many centres are now on the brink.”
She warned that those who survive may be forced to pass on the cost increases directly to the small businesses they host — a move that could further strain SMEs already facing rising taxes, inflation and energy costs.
FlexSA said the VOA has refused to offer guidance or clarity on its approach, adding to the sector’s uncertainty at a time when demand for flexible workspace remains high.
The VOA has said the change follows developments in case law, including Prosser v Ricketts (2024), Cardtronics v Sykes (2020) and Ludgate House v Ricketts (2019). Operators argue these rulings do not apply to serviced offices and accuse the agency of making sweeping policy changes through valuation practice rather than legislation.
There are more than 4,000 flexible workspace centres across the UK, providing essential space to freelancers, start-ups and growing SMEs. Industry organisations warn that closures could lead to reduced workspace availability, undermine entrepreneurial activity and hollow out high streets already struggling to recover from pandemic-era disruption.
The National Enterprise Network, which represents local enterprise agencies, said the changes could “trigger widespread business failures”, adding that the sector is still recovering from the long-term effects of Covid.
Tim Attridge, head of UK rating at CBRE, said the business rates system is outdated and ill-equipped for the modern workspace economy: “Rather than making changes to the methodology now, the VOA should cease merging and backdating assessments until the basis of valuation is established through the appropriate litigation.”
A VOA spokeswoman told Business Matters that recent case law required the agency to review how serviced offices are assessed: “Developments in case law have meant we have had to review the way serviced offices are assessed. Many may now need to be treated as a single property depending on their contractual arrangements.”
She added that the VOA is engaging 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.