20% VAT pushes London dining groups to Gulf

London restaurant owners are moving capital to the Gulf to escape a tax structure they view as uncompetitive. James Robson, co-owner of Fallow, recently signed a deal to open a branch in the region. He attributes the move to a domestic tax burden he describes as a tsunami, combined with a stronger work ethic abroad.

Fallow, located in St James's Market, serves 1,000 customers daily. The venue gained prominence through social media, where it holds 650,000 followers, and signature dishes such as a whole cod's head in spicy butter. Robson is not the only operator making the shift. Scott's of Mayfair, Gymkhana, and Park Chinois have all opened locations in Dubai. The bakery Bread Ahead has also expanded there, while Isabel's opened in Abu Dhabi.

These openings proceed despite recent conflict in the Middle East. The US-Israeli war in Iran earlier this year caused bombardment in Dubai and an exodus of expatriates. Some venues still face challenges; Dinner by Heston has remained temporarily closed since the war's fallout. The Michelin guide faced criticism earlier this month for listing 16 closed restaurants, a result of inspections conducted before the conflict began.

Robson identified East Asia, the United States, and the Gulf as primary growth targets while speaking from Hong Kong. He noted that America champions business and the Gulf actively assists operators. He criticized East Asia's work ethic and taxation system for putting the UK to shame. Hospitality VAT is the central issue. The UK rate of 20% is among the highest in Europe, where the average for restaurants is approximately 12%. Italy charges 10% on restaurant food sales.

Chefs are urging Finance Secretary Andy Burnham to reduce the rate in next week's budget. Robson stated the country sleepwalked into multiple anti-growth taxations in the last two budgets. He expects more changes next week. He also pointed to 25% corporation tax and dividend tax rates of 40% or more. He wants VAT brought closer to European levels.

Michelin-starred chef Jason Atherton now spends a third of his time at his Dubai restaurant. He says it is easier to make a profit there than in London. Robson said he does not resent paying UK tax and is proud to contribute to the country's deficit. However, he argued that UK growth no longer offers a sensible balance of risk and reward. He is playing it safe at home and focusing on overseas expansion.

Human rights campaigners urge caution on Gulf expansion. Felix Jakens, Amnesty International UK's director of campaigns, said the UAE has a poor record on workers' rights and protection from labour exploitation. He warned that heavy spending on the UAE's UK image, including through Manchester City, should not distract from worker treatment. Migrant workers, who form the majority of the UAE population, remain bound by a sponsorship system tying them to employers. They are denied the right to form trade unions. Jakens said UK businesses must carry out proper human rights due diligence to ensure kitchen staff are treated fairly and can raise concerns without fear of losing their job or visa.