Fallow Founder Expands to Gulf as London Restaurants Face 20% VAT

London dining groups are opening branches in the Gulf to offset the cost of doing business in the UK. James Robson, co-owner of Fallow in St James's Market, recently signed a deal to launch an outpost in the region. Fallow serves 1,000 people daily and has 650,000 Instagram followers.

Robson described the domestic tax environment as a 'tax tsunami.' He pointed to the 20% hospitality VAT, which is among the highest in Europe. The average rate for restaurants in Europe is about 12%. Italy charges 10% on food sold in restaurants. Robson said the UK has 'sleepwalked into multiple anti-growth taxations' in the last two budgets.

He also cited 25% corporation tax and dividend tax rates of 40% or more. Chefs are urging Chancellor Andy Burnham to cut the VAT rate in next week's budget. Robson expects the government to maintain or increase these taxes. He noted that the UK growth model no longer offers a sensible balance of risk and reward.

Other prominent London venues have already moved abroad. Scott's of Mayfair opened in Dubai. The two Michelin-starred Indian restaurant Gymkhana and the upmarket Chinese venue Park Chinois also opened in Dubai. The Borough Market bakery Bread Ahead branched out there as well. Isabel's, a Mayfair institution popular with politicians, opened in Abu Dhabi.

These openings continue despite recent conflict in the Middle East. The US-Israeli war in Iran earlier this year left Dubai facing bombardment and prompted an exodus of expats. Some restaurants are still struggling. Dinner by Heston has been temporarily closed since the fallout from the war. The Michelin guide faced criticism earlier this month for listing 16 restaurants that are closed, likely because inspections occurred before the war began.

Robson, speaking from Hong Kong, identified East Asia, the United States, and the Gulf as key growth targets. He said, '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.' 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.

Human rights campaigners urge caution on the expansion. Felix Jakens, director of campaigns at Amnesty International UK, said the UAE has a very poor record on workers' rights. He noted that the country's heavy spending on its UK image, including through Manchester City, should not distract from how workers are treated. Migrant workers make up the majority of the UAE's population. They remain bound by a sponsorship system that ties them to their employers and exposes them to abuse. They are denied the right to form trade unions. Jakens said any UK business expanding into the Gulf must carry out proper human rights due diligence so kitchen staff are treated fairly and paid properly.