London Chefs Expand to Gulf Amid 20% UK VAT

Fallow in St James's Market serves 1,000 people a day, a volume that has made it one of the most visited restaurants in London. The venue recently signed a deal to open an outpost in the Gulf region, joining a growing list of high-profile British eateries expanding abroad.

The move follows a pattern established by other major players in the city's hospitality sector. Scott's of Mayfair and the two-Michelin-starred Gymkhana have both opened locations in Dubai. The Borough Market bakery Bread Ahead has also expanded there, while Isabel's, a Mayfair restaurant popular with politicians, opened a branch in Abu Dhabi.

James Robson, co-owner of Fallow, identified the UK tax structure as a primary driver for the expansion. Speaking from Hong Kong, where he is scouting Asian markets, Robson stated that the Gulf actively encourages business, whereas the UK has adopted multiple anti-growth tax measures. He noted that hospitality VAT in the UK stands at 20%, a rate significantly higher than the European average of approximately 12%. Italy, for example, charges 10% on restaurant food.

Robson expects further changes in the upcoming UK budget and has urged Chancellor Andy Burnham to reduce the VAT rate. He cited 25% corporation tax and dividend tax rates of 40% or more as additional burdens. Jason Atherton, a Michelin-starred chef who now spends one-third of his time in Dubai, agreed that making a profit is easier abroad than in London.

The expansion continues despite regional instability. Earlier this year, the US-Israeli war in Iran resulted in bombardment in Dubai and a temporary exodus of expats. Some venues, including Dinner by Heston, have remained closed since the conflict began. The Michelin guide faced criticism this month for listing 16 closed restaurants, a result of inspections conducted before the war.

Human rights groups have raised concerns about the labor conditions in the Gulf. Felix Jakens, director of campaigns at Amnesty International UK, noted that the UAE has a poor record on workers' rights. He explained that migrant workers, who form the majority of the population, are bound by a sponsorship system that ties them to employers. These workers lack the right to form trade unions and face risks of labor exploitation.

Jakens urged UK businesses expanding into the region to conduct thorough human rights due diligence. He emphasized that kitchen staff must be paid fairly and allowed to raise concerns without fear of losing their jobs or visas. Robson said he does not resent paying UK tax but believes the current risk and reward balance no longer favors growth at home.