By Ruth Hall, Chief Executive, UK Science Park Association (UKSPA)
By working together, Government and industry can create a framework that provides certainty for operators, affordability for occupiers and supports the wider ambition of a growing and innovative economy.
Earlier this year, UKSPA brought together members and stakeholders to discuss the impact of changes in Valuation Office Agency (VOA) practice. The UK’s shared and managed workspace sector faces a significant shift in business rates treatment, with many coworking, serviced and managed office buildings now being reclassified as a single hereditament. In some cases, this has been accompanied by retrospective assessments backdated to April 2023, creating substantial financial exposure for operators and removing key reliefs previously available to small occupiers.
The Government has made clear that supporting growth, innovation and enterprise is central to its economic agenda. Achieving that ambition requires not only investment and reform, but also a tax system that reflects the way businesses operate today. One area where this challenge is becoming increasingly apparent is flexible workspace. Over the past decade, managed workspaces have become an integral part of the UK’s business and innovation landscape. They give entrepreneurs, start-ups, scale ups and established companies access to high-quality premises without the commitment of traditional long-term leases.
For many growing businesses, flexible workspace provides the bridge between an idea and a successful company. It provides not only accommodation, but also access to networks, expertise and communities that help businesses grow. These spaces contribute to innovation clusters, regional growth and thriving local business ecosystems. As the economy has evolved, the frameworks that support it must evolve too.
Recent changes in the way some flexible workspace properties are assessed for business rates have raised important questions for operators and occupiers. In an increasing number of cases, multi occupied flexible workspace buildings are being assessed as a single rateable property (hereditament) rather than as separate occupational units. This changes how business rates liabilities are calculated and may affect access to reliefs previously available to smaller occupiers.
For operators, the impact can be significant. Flexible workspace models are often built around transparent, all-inclusive pricing agreed in advance with occupiers. A material change in business rates liability can therefore create challenges that cannot always be easily absorbed or passed on.
For the businesses using these spaces, the issue is equally important. Many entrepreneurs and early-stage companies choose flexible workspace because it offers an accessible route into commercial premises. Increased costs could affect their ability to invest, recruit and grow.
This is not an argument against reform. The business rates system must continue to adapt as patterns of occupation change. Nor is it an argument for preferential treatment for one sector. Rather, it is about ensuring the system provides clarity, consistency and certainty for businesses operating in a modern economy.
UKSPA welcomes the Government’s recent announcement of targeted business rates support for retail and hospitality demonstrates. This decision shows government recognises the system sometimes requires adjustment where unintended consequences arise. That same principle should encourage ongoing consideration of how business rates are applied to flexible workspace, ensuring policy keeps pace with modern ways of working.
A constructive dialogue between Government, the Valuation Office Agency and the innovation sector would be a positive step towards addressing these challenges. This could include clearer guidance on the assessment of flexible workspace, appropriate transitional arrangements where significant changes occur, and ensuring future policy reflects the realities of today’s business environment.
The importance of flexible workspace extends well beyond the operators who provide it. These spaces are where thousands of companies start, grow and innovate. They support entrepreneurship, regional development and the UK’s ambition to remain an internationally competitive destination for investment.
“As the UK seeks to improve productivity and encourage business growth, the infrastructure that enables companies to succeed matters, and flexible workspace has become an essential part of that infrastructure.”
The opportunity now is to ensure that business rates policy supports, rather than unintentionally constrains, the changing needs of businesses. By working together, Government and industry can create a framework that provides certainty for operators, affordability for occupiers and supports the wider ambition of a growing and innovative economy.
