Workspace crackdown risks choking off the next generation of small businesses

A little-noticed change to business rates could have big consequences for the UK’s smallest firms. Plans affecting serviced offices and co-working spaces risk pushing up costs for the very places where many businesses begin. What looks like a technical tweak could end up hitting community workspaces, pricing out start-ups and weakening the pipeline of new businesses before they even get going.

Photo by Tanya Semenchuk on UnsplashHere’s the uncomfortable truth about growth in the United Kingdom: we talk endlessly about start-ups, scale-ups and productivity, but we pay far less attention to the fragile infrastructure that actually makes those things possible.

That is why the warning from the National Enterprise Network about proposed changes to business rates deserves to be taken seriously. On the surface, this looks like a technical adjustment in how serviced offices and co-working spaces are assessed. In reality, it risks becoming something much more consequential — a quiet but significant shift in costs that could ripple through the entire small business ecosystem.

The issue centres on how the Valuation Office Agency is now treating many managed workspace buildings as a single unit for business rates purposes. Previously, individual occupiers could benefit from Small Business Rates Relief. Under the revised approach, that relief effectively disappears, with the higher overall bill landing on the workspace provider and, inevitably, being passed on to the very smallest businesses through higher rents and charges.

For microbusinesses and sole traders, that matters. These spaces are often the first step out of a spare room or kitchen table. They provide not just a desk, but access to advice, networks and a sense of legitimacy that helps a business begin to trade and grow. Increase the cost of that first step, and fewer people will take it.

What makes this more concerning is who runs many of these spaces. They are not always commercial landlords maximising returns. Across the country, they are frequently community-based, not-for-profit organisations reinvesting income into local economies — funding mentoring, supporting people into work, and helping those who might otherwise be excluded from enterprise.

At the same time, many of these organisations are already navigating the loss of European funding streams, uncertainty around local government restructuring, and rising operating costs. Introducing additional financial pressure now, particularly if applied retrospectively, risks tipping some beyond viability.

There is a wider economic point here. If you increase the cost of entry into business, you reduce the number of businesses that start. If fewer businesses start, fewer survive. And if fewer survive, local economies weaken. It is a chain reaction, and it does not take much to set it in motion.

None of this suggests that the tax system should stand still. But it does underline the importance of understanding how policy plays out in practice. A measure designed for administrative simplicity can, without careful calibration, create disproportionate effects further down the line.

The government’s growth ambitions depend not just on large employers or high-profile sectors, but on the millions of small and micro businesses that form the backbone of the economy. The places that support them — often quietly, often locally — are part of that foundation.

If we are serious about growth, we need to look beyond headline policies and consider the structures that enable people to start in the first place. Because once that infrastructure is weakened, it is far harder to rebuild than it is to protect.