London restaurants expand to Gulf as UK tax rates draw criticism

Fallow in St James's Market serves 1,000 people daily, and its co-owner James Robson has just signed a deal to open an outpost in the Gulf. The restaurant, which has 650,000 Instagram followers and is known for dishes like a whole cod's head in spicy butter, is among several high-profile London venues expanding abroad. Robson attributes the move to a "tax tsunami" at home and a stronger work ethic in target markets.

The expansion follows a pattern established by other notable London brands. Scott's of Mayfair, Gymkhana, and Park Chinois have all opened locations in Dubai. Bread Ahead from Borough Market has also branched out there, while Isabel's, a Mayfair favorite, opened in Abu Dhabi. These openings continue despite the US-Israeli war in Iran earlier this year, which caused bombardment in Dubai and an exodus of expats. Some venues, including Dinner by Heston, remain closed due to the conflict's fallout.

Robson, speaking from Hong Kong, identified East Asia, the United States, and the Gulf as key growth targets. He noted that America champions business, the Gulf actively assists companies, and East Asia possesses a work ethic and taxation system that places the UK at a disadvantage. His comments come as hospitality groups reassess their global footprint in response to domestic financial pressures.

VAT is a central point of contention for these operators. The UK rate for hospitality stands at 20%, which is among the highest in Europe where the average for restaurants is about 12%. Italy charges 10% on food sold in restaurants. Chefs are urging Chancellor Andy Burnham to cut the rate in next week's budget. Robson stated that the country has "sleepwalked into multiple anti-growth taxations" in the last two budgets and expects further measures next week.

Beyond VAT, Robson pointed to 25% corporation tax and dividend tax of 40% or more as factors influencing expansion. He asked for VAT to be brought closer to European levels. 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 UK growth no longer offers a sensible balance of risk and reward.

Human rights campaigners urge caution regarding the Gulf expansion. Felix Jakens, Amnesty International UK's director of campaigns, said the UAE has a very poor record on workers' rights and protection from labour exploitation. He noted that the country's heavy spending on its UK image, including through Manchester City, should not distract from how workers are treated.

Jakens explained 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. This system exposes them to abuse and denies them the right to form trade unions. He said any UK business expanding into the Gulf must carry out proper human rights due diligence to ensure kitchen staff are treated fairly, paid properly, and able to raise concerns without fear of losing their job or visa.