London's Top Chefs Flee a 20% VAT Rate for Dubai's Gulf Boom

Fallow, the St James's Market restaurant that serves 1,000 people a day, has signed a deal to open an outpost in the Gulf. Its co-owner, James Robson, blames a "tax tsunami" in the UK and a better risk-reward balance abroad.

Fallow is not alone. Scott's in Mayfair, the two Michelin-starred Indian restaurant Gymkhana and the upmarket Chinese venue Park Chinois have all opened in Dubai. Isabel's, a Mayfair institution frequented by politicians, has opened in Abu Dhabi. Bread Ahead, the Borough Market bakery, has branched out in Dubai too.

The expansion continues despite the region's instability. Dubai faced bombardment and an exodus of expats earlier this year during the US-Israeli war in Iran. Restaurants keep opening in the emirate regardless.

Why are chefs leaving London?

The answer is largely arithmetic. UK hospitality carries a 20% VAT rate, one of the highest in Europe. The European average for restaurants sits at about 12%. Italy charges 10% for food sold in restaurants. Chefs are calling for the VAT rate to be cut in next week's budget.

"We have had a tsunami of taxes that have got to the point where taking business risk simply does not make sense in the UK," Robson said. "Sadly the country has sleepwalked into multiple anti-growth taxations the last two budgets and likely more will be forthcoming next week."

Robson has asked for VAT to be brought in line with Europe. He frames the burden as cumulative. "Add 25% corporation tax and 40%-plus dividend tax, then you start to question why do businesses any more."

He is not hostile to taxation itself. "I am incredibly proud of the taxes I pay and feel privileged that I can contribute to our country's deficit and will continue to do so," he said. "My point is UK growth simply does not have any risk-reward balance any more, therefore it's play incredibly safe here and focus overseas."

Michelin-starred chef Jason Atherton now spends a third of his time at his Dubai restaurant. He says it is easier to make a profit abroad than in London.

What is driving the Gulf push?

Robson is speaking from Hong Kong, where he is scouting opportunities in Asia. His growth map has three regions on it.

"East Asia, the States and the Gulf are key growth targets for us," 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. I'm incredibly keen to start working in these regions over the next few years."

Fallow built its name partly on Instagram, where it counts 650,000 followers, and on dishes like a whole cod's head drenched in spicy butter sauce. That audience travels with the brand.

What are the risks?

Human rights experts caution against the Gulf's shine. Felix Jakens, Amnesty International UK's director of campaigns, said: "Dubai might look like an attractive place to do business, but the UAE has a very poor record on workers' rights and protection from labour exploitation. The UAE has spent heavily on polishing its image in the UK, not least through Manchester City, but that glamour shouldn't distract from how the people who keep its economy running are treated."

Jakens pointed to the Gulf's labour structure. "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 exposes them to labour abuse. They are denied the right to form trade unions, leaving them few ways to challenge unfair treatment," he said.

His message to expanding UK businesses was direct. "Any UK business expanding into the Gulf has a responsibility to carry out proper human rights due diligence, to make sure the people working in its kitchens are treated fairly, paid properly and able to raise concerns without fear of losing their job or visa."

The commercial picture carries its own warnings. Dinner by Heston in Dubai has been temporarily closed since the fallout from the war in the Middle East. The Michelin guide drew criticism earlier this month for listing 16 restaurants that were permanently or temporarily closed, apparently because inspectors visited some of them at the start of the year, before the war began.

The bet, then, is conditional. If next week's budget leaves VAT at 20%, more London names are likely to follow Robson's route from St James's Market to the Gulf.