London Restaurant Chains Expand into Gulf as UK VAT Outpaces Europe

James Robson co-owns Fallow, a St James's Market restaurant that serves 1,000 guests daily. The venue has 650,000 Instagram followers and is known for dishes such as a whole cod head in spicy butter sauce. Robson recently signed a deal to open a branch in the Gulf. He describes the move as a response to a "tax tsunami" at home and a stronger work ethic abroad.

The UK charges 20% value-added tax on hospitality. This rate is among the highest in Europe, where the average for restaurants is about 12%. Italy charges 10% on food sold in restaurants. Robson and other chefs are urging Chancellor Andy Burnham to lower the rate in next week's budget. Robson stated that the country has "sleepwalked into multiple anti-growth taxations" over the last two budgets.

Fallow is not the only London brand expanding into the region. Scott's of Mayfair has opened in Dubai. Gymkhana, a two Michelin-starred Indian restaurant, and Park Chinois, an upmarket Chinese venue, have also opened there. Bread Ahead, a bakery in Borough Market, has branched out to Dubai. Isabel's, a Mayfair institution popular with politicians, has opened in Abu Dhabi.

These openings continue despite recent conflict in the Middle East. A US-Israeli war in Iran earlier this year left Dubai facing bombardment and caused an exodus of expats. Dinner by Heston has been temporarily closed since the war's fallout. The Michelin guide was criticized earlier this month for listing 16 restaurants that were closed, likely because inspections occurred before the conflict began.

Robson is currently in Hong Kong exploring opportunities in Asia. He identified East Asia, the United States, and the Gulf as key growth targets. He noted that the Gulf actively encourages business, while East Asia has a work ethic and taxation system that puts the UK to shame. Michelin-starred chef Jason Atherton now spends a third of his time at his Dubai restaurant. He said it is easier to make a profit abroad than in London.

Robson said he does not resent paying UK tax but argued that domestic growth no longer offers a sensible balance of risk and reward. He pointed to 25% corporation tax and dividend tax of 40% or more. He wants VAT brought closer to European levels. He is focusing overseas while playing it safe at home.

Human rights campaigners urge caution on the expansion. Felix Jakens, director of campaigns at Amnesty International UK, said the UAE has a very poor record on workers' rights. Migrant workers make up the majority of the UAE's population. They 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 UK businesses must carry out proper human rights due diligence so kitchen staff are treated fairly and paid properly.