20 Percent: The VAT Rate Driving London Chefs to the Gulf

James Robson, co owner of the highly regarded St James's Market restaurant Fallow, has signed a deal to open a new branch in the Gulf. He identifies a 'tax tsunami' in the United Kingdom as the primary driver for this expansion, a sentiment shared by other leading hospitality figures who are increasingly looking beyond the British Isles for growth opportunities.

The trend is not isolated to a single establishment. Scott's of Mayfair, a popular celebrity destination, has already opened in Dubai. Similarly, the two Michelin starred Indian restaurant Gymkhana and the upscale Chinese venue Park Chinois have expanded into the region. Even the bakery Bread Ahead from Borough Market and the political favorite Isabel's in Mayfair, which opened in Abu Dhabi, have joined the exodus. This movement continues despite recent geopolitical tensions in the Middle East, which earlier this year saw Dubai face bombardment during the US-Israeli war in Iran. That conflict prompted an exodus of expats and caused some venues, such as Dinner by Heston, to close temporarily. The Michelin guide also faced criticism earlier this month for listing 16 restaurants that were closed, likely due to inspections conducted before the war began.

Robson, who is currently in Hong Kong exploring Asian markets, views the Gulf, East Asia, and the United States as key targets. He notes that while America champions business and East Asia offers a strong work ethic, the Gulf actively encourages and assists new entrants. He argues that the UK has 'sleepwalked into multiple anti-growth taxations' over the last two budgets. With the next budget scheduled for next week, chefs are urging Chancellor Andy Burnham to reduce the hospitality VAT rate. Currently set at 20 percent, the UK rate is among the highest in Europe, where the average for restaurants is approximately 12 percent. Italy, for comparison, charges only 10 percent on food sold in dining establishments. Robson also highlights the 25 percent corporation tax and dividend taxes of 40 percent or more as factors that skew the risk and reward balance against staying home.

Jason Atherton, a Michelin starred chef, now spends a third of his time at his Dubai restaurant, noting that it is easier to generate profit there than in London. Robson explained that while he is proud to contribute to the UK deficit, the domestic environment no longer offers a sensible balance of risk and reward. Consequently, he is playing it safe at home and focusing his expansion efforts overseas.

However, human rights campaigners urge caution regarding this expansion. Felix Jakens, director of campaigns at Amnesty International UK, pointed out that the UAE has a poor record on workers' rights and protection from labor exploitation. He warned that the heavy spending on the country's UK image, particularly through Manchester City, should not distract from how workers are treated. Migrant workers, who make up the majority of the UAE population, remain bound by a sponsorship system that ties them to their employers and can expose them to abuse. They are also denied the right to form trade unions. Jakens emphasized that any UK business expanding into the Gulf must carry out 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.