London Restaurant Owners Expand to Gulf as UK Tax Rates Squeeze Margins

James Robson, co-owner of Fallow in St James's Market, has signed a deal to open a branch in the Gulf. The move follows a similar expansion by several of London's most prominent dining establishments, driven by what Robson describes as a tax tsunami at home. Fallow currently serves 1,000 people a day and has 650,000 followers on Instagram, with dishes such as a whole cod's head in spicy butter sauce helping to build its reputation.

Robson is not the only one making the shift. Scott's of Mayfair has opened in Dubai, alongside the two Michelin-starred Indian restaurant Gymkhana and the upmarket Chinese venue Park Chinois. The Borough Market bakery Bread Ahead has also expanded into the region, while Isabel's, a Mayfair institution popular with politicians, has opened a location in Abu Dhabi. These openings continue despite recent conflict in the Middle East, including the US-Israeli war in Iran earlier this year that caused an exodus of expats from Dubai.

Some restaurants in the Gulf are still recovering from the war's fallout. Dinner by Heston has remained temporarily closed since the conflict began. The Michelin guide faced criticism earlier this month for listing 16 restaurants that were permanently or temporarily closed, a discrepancy attributed to inspections conducted before the war started.

Robson, speaking from Hong Kong where he is exploring opportunities in Asia, identified East Asia, the United States, and the Gulf as key growth targets. He noted that America champions business, the Gulf actively encourages and assists companies, and East Asia has a work ethic and taxation system that puts the UK to shame. His comments reflect a broader frustration with the UK's hospitality VAT rate of 20%, which is among the highest in Europe. The average restaurant VAT rate in Europe is about 12%, while Italy charges 10% on food sold in restaurants.

Chefs are urging Chancellor Andy Burnham to cut the VAT rate in next week's budget. Robson stated that the country had sleepwalked into multiple anti-growth taxations in the last two budgets and expects more next week. He also pointed to 25% corporation tax and dividend tax of 40% or more, asking for VAT to be brought closer to European levels. Michelin-starred chef Jason Atherton now spends a third of his time at his Dubai restaurant, noting that it is easier to make a profit abroad than in London. Robson said he does not resent paying UK tax but argued that UK growth no longer offers a sensible balance of risk and reward.

Human rights campaigners are urging caution on the expansion. Felix Jakens, Amnesty International UK's director of campaigns, said the UAE has a very poor record on workers' rights and protection from labor exploitation. He noted that the UAE's heavy spending on its UK image, particularly through Manchester City, should not distract from how workers are treated. Jakens pointed out that migrant workers, who make up the majority of the UAE's population, remain bound by a sponsorship system that ties them to their employers and exposes them to abuse. They are denied the right to form trade unions.

Jakens said any UK business expanding into the Gulf must carry out proper human rights due diligence to ensure kitchen staff are treated fairly, paid properly, and able to raise concerns without fear of losing their job or visa.