London Restaurants Expand to Gulf as 20% VAT Outpaces European Average

James Robson, co-owner of Fallow, has signed a deal to open a restaurant branch in the Gulf. Robson stated that the move is driven by a "tax tsunami" in the United Kingdom and a stronger work ethic in the region. Fallow, located in St James's Market, serves 1,000 customers daily and holds 650,000 Instagram followers.

Robson is not the only London operator expanding into the Gulf. Scott's of Mayfair has opened in Dubai, as have the two Michelin-starred Indian restaurant Gymkhana and the Chinese venue Park Chinois. The Borough Market bakery Bread Ahead has also expanded there, while the Mayfair restaurant Isabel's opened in Abu Dhabi. These openings continue despite recent conflict in the Middle East, which caused some expats to leave Dubai and led to temporary closures like that of Dinner by Heston.

Hospitality value added tax is the central complaint for many owners. The UK rate stands at 20%, while the average for restaurants across Europe is approximately 12%. Italy charges only 10% on food sold in restaurants. Robson noted that the UK has "sleepwalked into multiple anti-growth taxations" over the last two budgets. He also pointed to a 25% corporation tax rate and a dividend tax of 40% or more.

Robson is currently in Hong Kong exploring opportunities in Asia. He identified East Asia, the United States, and the Gulf as key growth targets. "America champions business, the Gulf actively encourages and assists, whilst east Asia has a work ethic and taxation system that puts the UK to shame," Robson said. Michelin-starred chef Jason Atherton spends a third of his time at his Dubai restaurant and said 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 his expansion efforts overseas.

Human rights campaigners have urged caution regarding the expansion. Felix Jakens, director of campaigns for Amnesty International UK, said the United Arab Emirates has a poor record on workers' rights. He noted 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. Jakens said UK businesses must carry out proper human rights due diligence to ensure kitchen staff are treated fairly and paid properly.

Chefs are urging Chancellor Andy Burnham to cut the restaurant VAT rate in next week's budget. Robson expects more anti-growth taxations to be announced in that budget. He asked for the UK VAT rate to be brought closer to European levels.