Makes the situation worse...
My proposal is that UK domains should be £10 one-off setup admin fee - but in addition Nominet hold a £100 bond from the owner for each domain, refundable at any time.
Nominet is then funded on the investment income from all those £100s.
Name speculators will be more selective about what to hoard.
£100 shouldn't be enough to discourage small biz. I don't recall the reg fee I paid at the point Nominet was set up - £100 or £200, and that was to buy the name not "lease it". (Rather annoyingly 10 years later Nominet tried to reclaim it saying they had no record of our ownership so we weren't entitled to use the highly sought after name - until we proved them wrong (like a 10 year old letter from Nominet relating to the domain name and signed by Willy Black) - and agreed to start paying biannual renewal fees) .
Businesses or individuals no longer needing a name would be more inclined to reliquish it to get their bond refunded.
New businesses looking for a suitable name would once more stand a chance of getting something meaningful rather than finding loads of suitable ones all held by speculators with unrealistic valuations. Or else be driven into the hands of a less desirable TLD.
The only losers from this approach would be domain name speculators and domain name renewal scammers.
Renewal after 10 years will lead to more accidentally lapsed domain names. Business ownership, phone numbers, email and physical addresses could all have been changed.
Whereas a lapse of registration of the primary domain name like yourcompanyname.co.uk would be spotted immediately, secondary names (like your-company-name.co.uk and your-main-product.co.uk) pointing at the same underlying internet properties (web/email) may well go unnoticed. But even when the lapsed registration becomes evident, will anyone know how to get it back? Business has been bought, moved to new premises, maybe even changed name, changed employees, can they even prove they are entitled to renew?
Finally I predict that the domain name scammers will be in action any day now. You will get an official looking mailshot announcing "Your UK domain name can now be renewed for 10 years", the scammers will offer to provide this service for you. You pay, they collect as much as they can then abscond without paying nominet.