Annual report by TheCityUK highlighting the UK as the leading Western centre for Islamic finance.

The report summarises global trends in Islamic finance with a particular focus on the development of the UK market.

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TheCityUK Islamic Finance 2015 Report 

The UK Islamic finance market

• The UK’s profile as the leading Western centre for Islamic finance has grown in recent years, although institutions in London and other cities in the UK have been providing Islamic
  financial and related professional services for nearly 40 years.
• The UK is ranked above other important centres on its overall Islamic finance offering. The latest ICD Thomson Reuters Islamic Finance Development Report gives the UK an index value of 16.2, above the global average of 10.3 and the highest ranking of any non-Muslim-majority country.
• The number of institutions located in the UK that offer Islamic finance services is nearly double the number located in the US and far ahead of other Western countries. Assets of UK based institutions that offer Islamic finance services totalled some $4.5bn at the end of 2014.
• Islamic finance plays a significant role in infrastructure development in the UK. This includes development finance for The Shard, Battersea Power Station regeneration, London Gateway, the Olympic Village and the redevelopment of Chelsea Barracks. Over 6,500 homes in the North-West and the Midlands are currently being financed by a £700 million investment by Gatehouse Bank, a fully Sharia compliant bank. Current trends suggest that the role of Islamic finance in funding infrastructure development will continue to grow in the years ahead.
• An important feature of the development of the UK as a centre for Islamic finance has been a range of supportive Government policies over the last decade which have created a  fiscal and regulatory framework intended to broaden the market for Islamic products. This includes the removal of double tax and extension of tax relief on Islamic mortgages and the reform of arrangements for issues of debt. The Islamic finance sector operates under legislation that applies to all sectors – hence, there is a level playing field for both Islamic and conventional financial products.
• The Islamic finance retail market has developed in recent years with the launch of a series of Sharia compliant products including individual savings accounts, home purchase plans, a Sharia compliant pension scheme and business start-up financing. The Government is also developing Islamic student financing. There are now over 100,000 Islamic finance retail customers in the UK.
• There are currently five fully Sharia compliant banks licensed in the UK which puts it in the lead amongst Western countries. Assets of these banks totalled $3.6 billion at the end of 2014. There are also a number of conventional banks that provide Islamic financial services from a UK base. In total, over 20 banks in the UK offer Islamic finance services. This substantially exceeds the number in any other Western country or offshore centre and is nearly double the number in the US.
• The UK was the first Western nation to issue a sovereign Islamic bond. In 2014, the UK Government sold £200m of sukuk, maturing in 2019, to investors based in the UK and in major global hubs for Islamic finance. The UK’s first sovereign sukuk was oversubscribed with very strong demand and orders totalling around £2.3 billion.
• The London Stock Exchange is a key global venue for the issuance of sukuk. To date a total of 57 sukuk have been listed on London Stock Exchange with a total value of $51bn.
• In late 2014, the UK Government announced that UK Export Finance (UKEF) was planning to provide Sharia compliant support for UK exporters, a further sign of the City’s growing role in the global market for Sharia-compliant debt. Shortly afterwards, the UK Government-backed export credit guarantee agency underwrote its first Islamic bond, providing cover for a $916 million sukuk issued by Dubai’s Emirates Airline.
• Net assets of Islamic funds in the UK amount to around $600 million. A total of four Sharia compliant exchange traded funds (ETFs) and two Sharia compliant exchange trade products (ETPs) are listed on the London Stock Exchange.
• The UK is a Western leader in supporting infrastructure/environment for Islamic finance. Services in the UK are offered by financial intermediaries, asset managers, insurance providers and over 30 international law, accountancy, and consultancy firms.
• There is a growing demand for skills as Islamic finance expands. The UK is by far the largest provider of Islamic finance courses at both the undergraduate and postgraduate level, with offerings at around 70 educational institutions.