London Restaurant Owners Sign Gulf Deals to Offset High UK VAT

London dining groups are opening branches in the Gulf to offset the cost of high domestic taxes. James Robson, co-owner of Fallow in St James's Market, signed a deal to open an outpost in the region this week. He called the domestic fiscal environment a 'tax tsunami' that is pushing chefs to look abroad for growth.

Fallow serves 1,000 people a day and has 650,000 Instagram followers. The restaurant is known for dishes like a whole cod's head in spicy butter sauce. It joins other London brands already operating in the Gulf. Scott's of Mayfair opened in Dubai, as did the two Michelin-starred Indian restaurant Gymkhana and the Chinese venue Park Chinois. The Borough Market bakery Bread Ahead and the Mayfair institution Isabel's, which opened in Abu Dhabi, are also part of the wave.

The expansion continues despite recent conflict in the Middle East. The US-Israeli war in Iran earlier this year caused an exodus of expats from Dubai. Some venues remain closed. Dinner by Heston has been temporarily shut since the war's fallout. The Michelin guide drew criticism this month for listing 16 closed restaurants, a result of inspections conducted before the conflict began.

Robson, speaking from Hong Kong, identified East Asia, the United States, and the Gulf as key targets. He noted that America supports business, the Gulf offers assistance, and East Asia has a work ethic and tax system that puts the UK to shame. He pointed to the 20% VAT rate on hospitality as a central issue. The UK rate is among the highest in Europe, where the restaurant average is about 12%. Italy charges 10% on restaurant food.

Robson and other chefs are urging Chancellor Andy Burnham to cut the rate in next week's budget. Robson said the country has sleepwalked into multiple anti-growth taxations over the last two budgets. He cited 25% corporation tax and dividend taxes of 40% or more. He expects more tax changes in the upcoming budget and said UK growth no longer offers a sensible balance of risk and reward.

Jason Atherton, a Michelin-starred chef, spends a third of his time at his Dubai restaurant. He says it is easier to make a profit abroad than in London. Robson said he does not resent paying UK tax but is playing it safe at home while focusing overseas. He is proud to contribute to the country's deficit but sees the Gulf as a safer bet for growth.

Human rights groups urge caution on the expansion. Felix Jakens, director of campaigns at Amnesty International UK, said the UAE has a poor record on workers' rights. He noted that migrant workers, who make up the majority of the population, are bound by a sponsorship system that ties them to employers. These workers are denied the right to form trade unions. Jakens said UK businesses expanding into the Gulf must carry out proper human rights due diligence to ensure staff are treated fairly and can raise concerns without fear of losing their jobs or visas.