London Restaurants Pivot to Gulf Markets Amid Tax Concerns

James Robson, co-owner of the high-profile London restaurant Fallow, has signed a deal to open a new location in the Gulf region. This move marks the latest step in a broader trend among top-tier London chefs who are increasingly looking beyond the UK borders for growth. Robson points to a combination of significant tax pressures at home and a perceived stronger work ethic abroad as the primary motivations for this expansion.

Fallow, located in St James's Market, is widely considered the capital's most sought-after dining destination. The venue serves approximately 1,000 customers daily and gained widespread fame through social media, particularly Instagram, where it maintains a following of 650,000. Its popularity is driven by visually striking dishes, such as a whole cod's head served with a spicy butter sauce. The recent agreement to open an outpost in the region signals a strategic decision to diversify its international presence.

This expansion is part of a larger pattern of movement within the hospitality sector. Several other prominent London establishments have already established bases in the Gulf. Scott's of Mayfair, a well-known celebrity hotspot, has opened in Dubai. Similarly, Gymkhana, an Indian restaurant holding two Michelin stars, and Park Chinois, an upmarket Chinese venue, have both launched operations there. The Borough Market bakery Bread Ahead has also expanded into Dubai, while Isabel's, a Mayfair institution popular with politicians, has opened a branch in Abu Dhabi.

The timeline of these developments shows that the Gulf expansion is occurring despite recent geopolitical instability. Earlier this year, the US-Israeli war in Iran resulted in bombardment near Dubai and triggered a wave of expatriates leaving the area. The impact on the local food scene has been mixed. Dinner by Heston, for instance, has remained temporarily closed since the conflict began. Additionally, the Michelin guide faced criticism this month for listing 16 restaurants that were either permanently or temporarily closed, a situation attributed to inspections conducted earlier in the year before the war started.

Robson, who is currently in Hong Kong exploring opportunities in Asia, identified East Asia, the United States, and the Gulf as his primary growth targets. He noted that America champions business, while the Gulf actively encourages and assists companies. He further argued that East Asia possesses a work ethic and taxation system that places the UK in a less favorable light by comparison. This perspective reflects a growing sentiment among restaurateurs that the domestic environment is becoming less attractive for expansion.

A central point of contention for these chefs is the value added tax (VAT) on hospitality. The current UK rate stands at 20%, which is among the highest in Europe. The average rate for restaurants across the continent is approximately 12%, with Italy charging only 10% on food sold in dining establishments. Chefs are urging Chancellor Andy Burnham to reduce this rate in next week's budget. Robson stated that the country has sleepwalked into multiple anti-growth taxations over the last two budgets and anticipates further changes in the upcoming announcement. He also highlighted the 25% corporation tax and a dividend tax of 40% or more, calling for VAT to be brought closer to European levels.

Jason Atherton, a Michelin-starred chef, now spends a third of his time at his restaurant in Dubai. He has stated that it is easier to make a profit in that location than in London. Robson expressed that he does not resent paying UK taxes and takes pride in contributing to the national deficit. However, he argued that UK growth no longer offers a sensible balance of risk and reward. Consequently, he is choosing to play it safe with his domestic operations while focusing his energy on overseas markets.

The expansion has drawn attention from human rights campaigners who urge caution. Felix Jakens, director of campaigns at Amnesty International UK, noted that the UAE has a very poor record on workers' rights and protection from labor exploitation. He pointed out that the country's heavy spending on its image in the UK, including through its sponsorship of Manchester City, should not distract from how workers are treated on the ground.

Jakens emphasized 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 structure exposes them to potential abuse, and they are denied the right to form trade unions. He stated that any UK business expanding into the Gulf must carry out proper human rights due diligence. This ensures that kitchen staff are treated fairly, paid properly, and able to raise concerns without the fear of losing their job or visa.