The continued rise of Islamic finance in the UK

Despite the clear political will for the UK to become an Islamic finance hub, there are steep political challenges ahead.

At the ninth annual World Islamic Economic Forum in London on 29 October, David Cameron announced that he wants to see London standing shoulder-to-shoulder with Dubai and Kuala Lumpur as one of the great global centres of Islamic finance. In saying this, he declared that he intends Britain to become the first non-Muslim state to issue sukuk – Islamic bonds that are structured in such a way as they do not infringe upon Sharia law.

While the issue size is expected to be relatively modest – approximately £200m in the first instance – the announcement should rightfully be seen as a symbol of the square mile’s desire to capture a large share of the growing Islamic finance market. Few would dispute the wisdom of this move, for the growth of Islamic finance since the first sukuk was issued in Malaysia in 2000 has been very impressive.

The global Islamic economy, which includes the Islamic finance industry, is estimated to have a total value of $8 trillion. Sukuk have been used since their inception as a means for corporates and states to raise alternative financing. In light of the global crisis and liquidity squeeze, Islamic finance has grown exponentially. On this basis, it would be strange in a sense for London and other global financial centres not to try to gain some market share and we should expect announcements similar to that of Cameron’s from spokespeople in New York, Frankfurt, Paris, Hong Kong and Singapore.

The growth of Islamic finance is attributable to many different factors, but that growth would not have been possible without the development of the contemporary financing techniques or structures that underpin the industry. For this, sukuks today can be seen as a union between religious principles and modern financing techniques. One can understand the appeal of sukuk, particularly in light of the banking crisis that has gripped the Western world and beyond since 2008, for in some senses it can be seen as a more tangible investment than a conventional bond, because the sukuk owner has a stake in the underlying asset rather than a share of debt. So while a conventional bond holder essentially receives interest on a loan, the sukuk holder receives a share of profit derived from the commercial ventures of the business, rather than on interest (interest is strictly forbidden under Sharia law).

However, despite the clear political will for the UK to become an Islamic finance hub, there are undoubtedly challenges lying ahead. An obvious area of weakness is a lack of indigenous expertise in terms of awareness of the range of financial products on offer and the various structures that can be implemented to make finance initiatives Sharia-compliant. Although there are Islamic finance practices operating out of London, there is still a dearth of expertise. Furthermore, regulation standardising practices and giving confidence to borrowers will be required to grow the industry. However, these are not immutable, nor insurmountable, obstacles.

As uncertainty persists in certain parts of the global economy, it has created an opportunity for Islamic finance to continue to flourish and expand into new economies. The UK has put down a marker in aiming to be the first western nation to issue sukuk and such a move is to be welcomed by the markets and legal and financial services. If some of the challenges are removed then watch this space, for it would be a brave individual who discounts the possibility of further growth in this intriguing market. There are currently 50 sukuk listings on the London Stock Exchange – expect many more to come.

Left to right: Hamid Karzai, Hassanal Bolkiah, Najib Razak, David Cameron, King Abdullah II, Prince Salman bin Hamad al-Khalifa and Atifete Jahaga at the 9th World Islamic Economic Forum in London. Photograph: Getty Images.

Co-CEO of DLA Piper

Getty.
Show Hide image

Andy Burnham and Sadiq Khan are both slippery self-mythologisers – so why do we rate one more than the other?

Their obsessions with their childhoods have both become punchlines; but one of these jokes, it feels to me, is told with a lot more affection than the other.

Andy Burnham is a man whose policies and opinions seem to owe more to political expediency than they do to belief. He bangs on to the point of tedium about his own class, background and interests. As a result he’s widely seen as an unprincipled flip-flopper.

Sadiq Khan is a man whose policies and opinions seem to owe more to political expediency than they do to belief. He bangs on to the point of tedium about his own class, background and interests. As a result he’s the hugely popular mayor of London, the voice of those who’d be proud to think of themselves as the metropolitan liberal elite, and is even talked of as a possible future leader of the Labour party.

Oh, and also they were both born in 1970. So that’s a thing they have in common, too.

Why it is this approach to politics should have worked so much better for the mayor of London than the would-be mayor of Manchester is something I’ve been trying to work out for a while. There are definite parallels between Burnham’s attempts to present himself as a normal northern bloke who likes normal things like football, and Sadiq’s endless reminders that he’s a sarf London geezer whose dad drove a bus. They’ve both become punchlines; but one of these jokes, it feels to me, is told with a lot more affection than the other.

And yes, Burnham apparent tendency to switch sides, on everything from NHS privatisation to the 2015 welfare vote to the leadership of Jeremy Corbyn, has given him a reputation for slipperiness. But Sadiq’s core campaign pledge was to freeze London transport fares; everyone said it was nonsense, and true to form it was, and you’d be hard pressed to find an observer who thought this an atypical lapse on the mayor’s part. (Khan, too, has switched sides on the matter of Jeremy Corbyn.)

 And yet, he seems to get away with this, in a way that Burnham doesn’t. His low-level duplicity is factored in, and it’s hard to judge him for it because, well, it’s just what he’s like, isn’t it? For a long time, the Tory leadership’s line on London’s last mayor was “Boris is Boris”, meaning, look, we don’t trust him either, but what you gonna do? Well: Sadiq is Sadiq.

Even the names we refer to them by suggest that one of these two guys is viewed very differently from the other. I’ve instinctively slipped into referring to the mayor of London by his first name: he’s always Sadiq, not Khan, just as his predecessors were Boris and Ken. But, despite Eoin Clarke’s brief attempt to promote his 2015 leadership campaign with a twitter feed called “Labour Andy”, Burnham is still Burnham: formal, not familiar. 

I’ve a few theories to explain all this, though I’ve no idea which is correct. For a while I’ve assumed it’s about sincerity. When Sadiq Khan mentions his dad’s bus for the 257th time in a day, he does it with a wink to the audience, making a crack about the fact he won’t stop going on about it. That way, the message gets through to the punters at home who are only half listening, but the bored lobby hacks who’ve heard this routine two dozen times before feel they’re in the joke.

Burnham, it seems to me, lacks this lightness of touch: when he won’t stop banging on about the fact he grew up in the north, it feels uncomfortably like he means it. And to take yourself seriously in politics is sometimes to invite others to make jokes at your expense.

Then again, perhaps the problem is that Burnham isn’t quite sincere enough. Sadiq Khan genuinely is the son of a bus-driving immigrant: he may keep going on about it, but it is at least true. Burnham’s “just a northern lad” narrative is true, too, but excludes some crucial facts: that he went to Cambridge, and was working in Parliament aged 24. Perhaps that shouldn’t change how we interpret his story; but I fear, nonetheless, it does.

Maybe that’s not it, though: maybe I’m just another London media snob. Because Burnham did grow up at the disadvantaged end of the country, a region where, for too many people, chasing opportunities means leaving. The idea London is a city where the son of a bus driver can become mayor flatters our metropolitan self-image; the idea that a northerner who wants to build a career in politics has to head south at the earliest opportunity does the opposite. 

So if we roll our eyes when Burnham talks about the north, perhaps that reflects badly on us, not him: the opposite of northern chippiness is southern snobbery.

There’s one last possibility for why we may rate Sadiq Khan more highly than Andy Burnham: Sadiq Khan won. We can titter a little at the jokes and the fibs but he is, nonetheless, mayor of London. Andy Burnham is just the bloke who lost two Labour leadership campaigns.

At least – for now. In six weeks time, he’s highly likely to the first mayor of Greater Manchester. Slipperiness is not the worst quality in a mayor; and so much of the job will be about banging the drum for the city, and the region, that Burnham’s tendency to wear his northernness on his sleeve will be a positive boon.

Sadiq Khan’s stature has grown because the fact he became London’s mayor seems to say something, about the kind of city London is and the kind we want it to be. Perhaps, after May, Andy Burnham can do the same for the north – and the north can do the same for Andy Burnham.

Jonn Elledge edits the New Statesman's sister site CityMetric, and writes for the NS about subjects including politics, history and Daniel Hannan. You can find him on Twitter or Facebook.