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

Election 2017: The 50 Labour MPs most at risk of losing their seats

Dozens of Labour MPs are at risk of losing their seats on June 8. Here are the 50 sitting MPs most at risk. 

Labour MPs representing marginal seats are at risk of losing their seats should their party's low polling numbers translate into electoral reality. Here's a full list of the 50 sitting MPs with the smallest majorities. 

Chris Matheson – City of Chester
Majority: 93 (0.2 per cent of total turnout)
Second place in 2015: Conservatives

Rupa Huq – Ealing Central & Acton
Majority: 274 (0.5 per cent)
Second place in 2015: Conservatives

Albert Owen – Ynys Mon
Majority: 229 (0.6 per cent)
Second place in 2015: Plaid Cymru

Ruth Cadbury – Brentford & Isleworth
Majority: 465 (0.9 per cent)
Second place in 2015: Conservatives

Margaret Greenwood – Wirral West
Majority: 417 (0.9 per cent)
Second place in 2015: Conservatives

Holly Lynch – Halifax
Majority: 428 (1 per cent)
Second place in 2015: Conservatives

Daniel Zeichner – Cambridge
Majority: 599 (1.1 per cent)
Second place in 2015: Liberal Democrats

Wes Streeting – Ilford North
Majority: 589 (1.2 per cent)
Second place in 2015: Conservatives

Paul Farrelly – Newcastle-under-Lyme
Majority: 650 (1.5 per cent)
Second place in 2015: Conservatives

John Woodcock – Barrow & Furness
Majority: 795 (1.8 per cent)
Second place in 2015: Conservatives

Tulip Siddiq – Hampstead & Kilburn
Majority: 1138 (2.1 per cent)
Second place in 2015: Conservatives

Joan Ryan – Enfield North
Majority: 1086 (2.3 per cent)
Second place in 2015: Conservatives

Peter Kyle – Hove
Majority: 1236 (2.4 per cent)
Second place in 2015: Conservatives

Paula Sheriff – Dewsbury
Majority: 1451 (2.3 per cent)
Second place in 2015: Conservatives

Cat Smith – Lancaster & Fleetwood
Majority: 1265 (3.1 per cent)
Second place in 2015: Conservatives

Natascha Engel - North East Derbyshire
Majority: 1883 (3.9 per cent)
Second place in 2015: Conservatives

Gareth Thomas – Harrow West
Majority: 2208 (4.8 per cent)
Second place in 2015: Conservatives

Madeleine Moon – Bridgend
Majority: 1927 (4.9 per cent)
Second place in 2015: Conservatives

Karen Buck – Westminster North
Majority: 1977 (5 per cent)
Second place in 2015: Conservatives

Iain Murray – Edinburgh South
Majority: 2637 (5.3 per cent)
Second place in 2015: SNP

Rosena Allin-Khan – Tooting
Majority: 2842 (5.3 per cent)
Second place in 2015: Conservatives

Ian Lucas – Wrexham
Majority: 1831 (5.6 per cent)
Second place in 2015: Conservatives

Richard Burden – Birmingham Northfield
Majority: 2509 (5.9 per cent)
Second place in 2015: Conservatives

Mary Creagh – Wakefield
Majority: 2613 (6.1 per cent)
Second place in 2015: Conservatives
 

Vernon Coaker – Gedling
Majority: 2986 (6.2 per cent)
Second place in 2015: Conservatives

Clive Efford – Eltham
Majority: 2693 (6.2 per cent)
Second place in 2015: Conservatives

Rob Flello - Stoke-on-Trent South
Majority: 2539 (6.5 per cent)
Second place in 2015: Conservatives

Susan Jones – Clwyd South
Majority: 2402 (6.8 per cent)
Second place in 2015: Conservatives

Jim Cunningham – Coventry South
Majority: 3188 (7.3 per cent)
Second place in 2015: Conservatives

Jenny Chapman – Darlington
Majority: 3024 (7.6 per cent)
Second place in 2015: Conservatives

David Hanson – Delyn
Majority: 2930 (7.7 per cent)
Second place in 2015: Conservatives

Gordon Marsden – Blackpool South
Majority: 2585 (8 per cent)
Second place in 2015: Conservatives

Julie Cooper – Burnley
Majority: 3244 (8.1 per cent)
Second place in 2015: Liberal Democrats

Mark Tami – Alyn & Deeside
Majority: 3343 (8.1 per cent)
Second place in 2015: Conservatives

Nic Dakin – Scunthorpe
Majority: 3134 (8.5 per cent)
Second place in 2015: Conservatives

Kerry McCarthy – Bristol East
Majority: 3980 (8.6 per cent)
Second place in 2015: Conservatives

Paul Flynn – Newport West
Majority: 3510 (8.7 per cent)
Second place in 2015: Conservatives

Alan Whitehead - Southampton Test
Majority: 3810 (8.8 per cent)
Second place in 2015: Conservatives

Neil Coyle – Bermondsey & Old Southwark
Majority: 4489 (8.8 per cent)
Second place in 2015: Liberal Democrats

Lindsay Hoyle (Deputy speaker) – Chorley
Majority: 4530 (8.8 per cent)
Second place in 2015: Conservatives

Helen Goodman – Bishop Auckland
Majority: 3508 (8.9 per cent)
Second place in 2015: Conservatives

Thangam Debbonaire – Bristol West
Majority: 5673 (8.9 per cent)
Second place in 2015: Green

Geoffrey Robinson – Coventry North West
Majority: 4509 (10 per cent)
Second place in 2015: Conservative

Graham Jones – Hyndburn
Majority: 4400 (10.2 per cent)
Second place in 2015: Conservatives

David Crausby – Bolton North East
Majority: 4377 (10.2 per cent)
Second place in 2015: Conservatives

Ivan Lewis - Bury South
Majority: 3508 (8.9 per cent)
Second place in 2015: Conservatives

Liz McInnes – Heywood & Middleton
Majority: 5299 (10.9 per cent)
Second place in 2015: Ukip

Alison McGovern – Wirral South
Majority: 4599 (11 per cent)
Second place in 2015: Conservatives

Alan Meale – Mansfield
Majority: 5135 (11.3 per cent)
Second place in 2015: Conservatives

0800 7318496