London Dining: Gulf Expansion Accelerates Amid Tax Concerns

The hospitality sector in the United Kingdom is undergoing a geographic shift, with several high-profile London brands establishing permanent operations in the Gulf region.

James Robson, co-owner of Fallow in St James's Market, has signed a deal to open a new location in the area. Fallow serves approximately 1,000 customers daily and maintains an Instagram following of 650,000. Robson attributes the move to a combination of domestic fiscal pressure and a favorable business environment abroad.

The expansion follows a trend established by other prominent venues. Scott's of Mayfair has opened in Dubai, alongside Gymkhana, an Indian restaurant holding two Michelin stars, and Park Chinois, a Chinese dining establishment. The Bakery Bread Ahead from Borough Market has also expanded to Dubai, while Isabel's, a Mayfair restaurant frequented by politicians, has opened in Abu Dhabi.

These openings occur despite ongoing regional instability. A conflict involving the United States, Israel, and Iran earlier this year resulted in bombardment in Dubai and a departure of some expatriates. The Michelin Guide faced criticism in October for listing 16 closed restaurants, a decision attributed to inspections conducted before the war began. Dinner by Heston remains temporarily closed due to the fallout.

Robson, speaking from Hong Kong, identified the Gulf, East Asia, and the United States as primary targets for growth. He noted that the Gulf actively encourages and assists businesses, while East Asia offers a strong work ethic and a tax system that compares favorably to the UK. He described the US as a region that champions business.

Hospitality Value Added Tax (VAT) is a central point of contention. The UK rate stands at 20%, which is among the highest in Europe. The average restaurant VAT rate across Europe is approximately 12%, while Italy charges 10% on food sold in restaurants. Industry leaders are urging Chancellor Andy Burnham to reduce the rate in the upcoming budget. Robson stated that the country has entered multiple anti-growth taxations over the last two budgets and expects further changes next week. He also cited corporation tax at 25% and dividend tax rates of 40% or more.

Jason Atherton, a Michelin-starred chef, currently spends one-third of his time at his Dubai restaurant. He stated that it is easier to make a profit in Dubai than in London. Robson said he does not resent paying UK tax but argued that the risk and reward balance no longer favors domestic growth. He said he is maintaining a conservative approach in London while focusing overseas expansion.

Human rights organizations have called for caution regarding the expansion. Felix Jakens, director of campaigns at Amnesty International UK, noted that the UAE has a poor record on workers' rights and protection from labor exploitation. He said the UAE's heavy investment in its UK image, including through Manchester City, should not obscure the treatment of workers.

Jakens explained that migrant workers, who form the majority of the UAE's population, remain tied to a sponsorship system that links them to their employers. This system can expose workers to abuse and denies them the right to form trade unions. He advised that any UK business expanding into the Gulf must conduct human rights due diligence to ensure kitchen staff are treated fairly, paid properly, and can raise concerns without fear of losing their jobs or visas.