London Restaurants Expand Into Gulf Amid UK Tax Concerns

Prominent London restaurants are accelerating their expansion into the Gulf region, driven by what one co-owner describes as a tax tsunami at home and a more favorable work environment abroad. James Robson, co-owner of the St James's Market venue Fallow, recently signed a deal to open a branch in the area. Fallow, which serves approximately 1,000 customers daily and has amassed 650,000 followers on social media, is part of a growing trend of capital establishments seeking opportunities overseas.

This move follows a wave of other high-profile openings. Scott's of Mayfair, a well-known celebrity destination, has already established a presence in Dubai. Additionally, the two Michelin-starred Indian restaurant Gymkhana and the upscale Chinese venue Park Chinois have launched operations there. The trend extends beyond fine dining, with the Borough Market bakery Bread Ahead and the Mayfair institution Isabel's, a favorite among politicians, opening locations in Dubai and Abu Dhabi respectively.

These expansions continue despite recent geopolitical instability in the Middle East. The US-Israeli war in Iran earlier this year resulted in bombardment in Dubai and a temporary exodus of expatriates. Some venues, such as Dinner by Heston, have remained temporarily closed since the conflict began. The Michelin guide also faced criticism earlier this month for listing 16 restaurants that are currently closed, a decision attributed to inspections conducted before the war started.

Robson, currently exploring opportunities in Hong Kong, identified East Asia, the United States, and the Gulf as primary growth targets. He noted that while America champions business and the Gulf actively assists it, East Asia offers a work ethic and taxation system that he believes puts the UK to shame. A central grievance for the industry is the 20% value added tax on hospitality, which is among the highest in Europe. The average restaurant rate in the region is about 12%, while Italy charges 10% on food served in restaurants.

Chefs are urging Chancellor Andy Burnham to reduce the rate in next week's budget. Robson argued that the UK has sleepwalked into multiple anti-growth taxations over the last two budgets. He pointed to the 25% corporation tax and dividend tax rates of 40% or more, calling for VAT to align closer to European levels. Michelin-starred chef Jason Atherton, who now spends a third of his time at his Dubai restaurant, agreed that it is easier to make a profit abroad than in London.

Robson stated he does not resent paying UK tax and is proud to contribute to the national deficit. However, he argued that the current UK growth environment no longer offers a sensible balance of risk and reward, leading him to play it safe at home while focusing expansion efforts overseas. This strategic shift reflects a broader desire to mitigate financial risks associated with the domestic tax landscape.

Human rights campaigners have urged caution regarding the expansion. Felix Jakens, director of campaigns at Amnesty International UK, highlighted the UAE's poor record on workers' rights and protection from labor exploitation. He cautioned that the country's heavy investment in its UK image, including through sports sponsorships, should not obscure how workers are treated. Migrant workers, who make up the majority of the UAE's population, remain bound by a sponsorship system that ties them to their employers and denies them the right to form trade unions. Jakens emphasized that any UK business expanding into the Gulf must conduct 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.