Flexible workspace faces £600m blow
as business rates shift takes hold

A stark warning is rippling through the flexible workspace market, with new findings suggesting business rates changes could trigger an eye-watering £600 million annual burden on the sector - a shift that could send shockwaves well beyond the operators themselves.

The report - commissioned by the Flexible Space Association and produced by ChamberlainWalker - points to a growing tension within the market, one that risks cutting against the very model that has underpinned its rise over the past decade.

Driving this is a technical -  but deeply consequential - recalibration by the Valuation Office Agency, which has moved to reclassify serviced office buildings as single hereditaments, fundamentally shifting how rates are calculated.

In doing so, it transfers full rates liability onto operators and strips many occupiers of their Small Business Rates Relief -  a detail that, while subtle on the surface, carries very real implications on the ground.

A structural change with real-world impact

The numbers are difficult to ignore. According to the report, the change equates to an average increase of around £5,400 per year for small businesses based in serviced offices - costs that are, in many cases, being passed through from operator to occupier. Scaled across the market, that lands at just under £600 million annually.

But it’s not just the headline figure raising eyebrows - it’s where that cost ultimately lands. Flexible workspace has long positioned itself as the entry point for start-ups, independents and growing teams, offering lower barriers to entry and a more agile way to scale. Strip away affordability, and that model starts to feel less accessible.

The report warns that, if left unchecked, the knock-on effect could be significant: up to 150,000 workers potentially pushed out of office environments altogether, as businesses reassess whether they can justify the additional overhead.

Beyond offices: a wider economic ripple

What makes this particularly pointed is the broader ecosystem at play. Flexible workspace doesn’t operate in isolation - it drives local economies, fuels high street activity, and supports a disproportionate number of high-growth SMEs. The sector is estimated to contribute to as many as 1.75 million jobs across the UK.

Against that backdrop, the potential secondary impacts begin to take shape. Reduced office occupancy, fewer people in town centres, and - according to the analysis - up to £260 million a year in lost high street spending. It’s a chain reaction that extends well beyond the four walls of a workspace - and one that begins to challenge the trajectory the sector has been on.

Industry response

Industry response has been swift - and notably sharp. Concerns around reclassification first surfaced back in late 2025, when more than 60 serviced office providers, including Clockwise, Runway East and x+why, collectively raised the alarm. Since then, discussions have continued - including engagement with the Treasury - but, as it stands, no clear resolution has emerged.

The Flexible Space Association has been particularly vocal, arguing that what may appear to be a technical adjustment risks destabilising an entire ecosystem of operators and small businesses. The concern isn’t taxation in itself - it’s how it’s being applied, and who ultimately absorbs the impact.

As Jane Sartin, the trade body’s executive director, puts it: “Workspace operators have repeatedly warned the VOA that changes to business rates assessment were already creating serious risks for flexible workspaces and the small businesses that rely on them.”

Her stance is unequivocal. “The VOA has gone completely rogue. We urgently need the Treasury to intervene against a backwards and harmful tax hike that they never signed on to.”

Chris Walker, founder of ChamberlainWalker and lead author of the report, is equally direct: “This is not a marginal or technical adjustment, but a material cost to a part of the economy that disproportionately supports small high-growth firms and local high street ecosystems.”

He goes further still, questioning the broader policy alignment: “This seems entirely at odds with the government’s economic growth objectives. It is just about the most damaging way I can think of for a government to raise what would be a modest amount of revenue.”

What happens next?

For now, the sector is left navigating a change that feels - to many - at odds with broader growth ambitions. There are calls for intervention, and a growing sense that the conversation isn’t over. Because while the policy may be in place, its consequences are only just beginning to surface.

And in a market already balancing cost pressures, evolving demand, and shifting workplace habits, this is one more variable - and a significant one at that. Whether it’s revisited or remains in place, one thing is clear: what began as a technical adjustment is fast becoming one of the most consequential shifts the flexible workspace sector has faced in recent years.

To stay up to date on this business rates shift and its impact on the flexible workspace market, be sure to subscribe.