Fallow Signs Gulf Deal as 20% UK VAT Outpaces European Average

James Robson signed a deal to open a branch of his St James's Market restaurant, Fallow, in the Gulf. He cited a "tax tsunami" in Britain and a stronger work ethic abroad as the primary drivers for the expansion. This move joins a growing list of prominent London dining establishments establishing a presence in the region to manage their tax exposure.

The core financial issue is the Value Added Tax rate. The UK charges 20% on hospitality services. In contrast, the average restaurant VAT rate across Europe is approximately 12%. Italy charges only 10% on food sold in restaurants. Robson noted that the country has "sleepwalked into multiple anti-growth taxations" over the last two budgets. He expects further measures in next week's budget, specifically pointing to a 25% corporation tax rate and dividend taxes of 40% or more.

Fallow serves 1,000 people daily and holds 650,000 followers on Instagram. It is not the only major player moving capital to the Gulf. Scott's of Mayfair has opened in Dubai, as have the two Michelin-starred Indian restaurant Gymkhana and the upscale Chinese venue Park Chinois. The Borough Market bakery Bread Ahead has also expanded there. Additionally, Isabel's, a Mayfair establishment popular with politicians, has opened a location in Abu Dhabi.

These openings proceed despite recent instability in the Middle East. The US-Israeli war in Iran earlier this year left Dubai facing bombardment and triggered an exodus of expatriates. Some venues, including Dinner by Heston, remain temporarily closed due to the fallout. The Michelin guide faced criticism this month for listing 16 restaurants that were permanently or temporarily closed, a result of inspections conducted before the conflict began.

Michelin-starred chef Jason Atherton now spends one-third of his time at his Dubai restaurant. He stated that it is easier to make a profit abroad than in London. Robson, speaking from Hong Kong where he is exploring Asian opportunities, identified East Asia, the United States, and the Gulf as key growth targets. He observed that the Gulf actively encourages business, while East Asia offers a work ethic and taxation system that puts the UK to shame.

Human rights campaigners have urged caution regarding the expansion. Felix Jakens, Amnesty International UK's director of campaigns, noted that the UAE has a poor record on workers' rights. He highlighted 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. 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 to ensure kitchen staff are treated fairly and paid properly.

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 choosing to play it safe at home and focus on overseas markets where the tax burden is lower.