Fallow Opens Gulf Outlet as UK Restaurant VAT Hits 20%

James Robson, co-owner of the St James's Market restaurant Fallow, has signed a deal to open a branch in the Gulf. The move follows a pattern among London's high-profile dining groups, which are increasingly establishing bases in the region. Robson cites a combination of high domestic taxes and a stronger work ethic abroad as the primary drivers for the expansion.

Fallow serves approximately 1,000 customers daily and maintains a social media following of 650,000. The restaurant is known for dishes such as a whole cod's head served in a spicy butter sauce. It joins a list of established London brands that have already opened locations in the Gulf, including Scott's of Mayfair, the two Michelin-starred Gymkhana, and the Chinese restaurant Park Chinois. The Borough Market bakery Bread Ahead and the Mayfair restaurant Isabel's, the latter based in Abu Dhabi, have also expanded into the region.

The expansion is occurring despite recent geopolitical instability in the Middle East. A US-Israeli conflict with Iran earlier this year resulted in bombardment of Dubai and a departure of expatriates. Some venues, including Dinner by Heston, have remained temporarily closed due to the fallout. The Michelin Guide faced criticism in October for listing 16 restaurants that were closed, a discrepancy attributed to inspections conducted before the conflict began.

Robson, speaking from Hong Kong, identified East Asia, the United States, and the Gulf as key growth markets. He stated that the Gulf actively encourages business, while East Asia offers a favorable tax system. He contrasted this with the UK, which he said has "sleepwalked into multiple anti-growth taxations" in the last two budgets. Robson noted that he expects further tax changes in the upcoming budget.

The central issue for the industry is the value added tax on hospitality. The UK rate stands at 20%, which is among the highest in Europe. The average restaurant VAT rate in Europe is approximately 12%. Italy charges a rate of 10% on food sold in restaurants. Chefs are urging Chancellor Andy Burnham to lower the UK rate in next week's budget. Robson also pointed to the 25% corporation tax and dividend tax rates of 40% or more, arguing that the UK needs to align its VAT closer to European levels.

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 in that location than in London. Robson said he remains proud to contribute to the UK deficit but believes the current growth environment no longer offers a sensible balance of risk and reward. Consequently, he is maintaining a safe presence at home while focusing on overseas opportunities.

Felix Jakens, director of campaigns for Amnesty International UK, urged caution regarding the expansion. He noted that the UAE has a poor record on workers' rights and protection from labor exploitation. Jakens stated 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. These workers are denied the right to form trade unions. Jakens said any UK business expanding into the Gulf must conduct proper human rights due diligence to ensure kitchen staff are treated fairly, paid properly, and can raise concerns without fear of losing their job or visa.