TheCityUK Warns UK Risks Losing Global Islamic Finance Leadership Without Strategic Action

Quick Summary

The UK must accelerate its Islamic finance strategy to prevent losing its leadership position to global competitors. With Shariah-compliant assets set to hit $7.5 trillion by 2028, TheCityUK urges the government to launch digital sovereign Sukuk and create a dedicated investment portal to attract global Muslim wealth.

How can the UK secure its position in Islamic finance?

To maintain its status as the leading western hub, the UK must transition from a passive to a proactive strategy. TheCityUK recommends establishing a dedicated investment portal to bridge the gap between Shariah-compliant capital and UK infrastructure projects. Currently, 62% of Muslim UHNW individuals prefer Shariah-compliant investments even if returns are slightly lower, representing a massive untapped pool of foreign direct investment.

• Develop a pipeline of investor-ready opportunities in green energy and real estate.
• Ensure consistent sovereign Sukuk issuance to provide a reliable market benchmark.
• Embed Islamic finance specialists within the FCA and HM Treasury.

What role does digital innovation play in Shariah-compliant markets?

The convergence of digital capital markets and Islamic finance offers a unique "first-mover" advantage for London. By exploring a digital sovereign Sukuk, the UK can lead in the tokenization of Shariah-compliant assets. This aligns with existing initiatives like the Digital Securities Sandbox and the Digital Gilt Instrument (DIGIT) programme, potentially attracting tech-savvy investors from the Gulf and Southeast Asia.

How does Islamic finance impact the broader UK economy?

Beyond attracting foreign capital, Islamic finance leadership drives the export of high-value professional services. London’s legal and advisory firms are essential for structuring global transactions, regardless of where the assets are located. Furthermore, expanding Shariah-compliant pension products improves financial inclusion for the UK’s domestic Muslim population, while UK Export Finance (UKEF) tools help de-risk international trade projects.

"The UK has a terrific tradition of servicing global Islamic financial markets but to capitalise on the significant and immediate global growth opportunity it presents there needs to be greater pace and ambition from the UK government and regulators," said Nicola Watkinson, Managing Director, International, TheCityUK. "Global competition is increasing and the task now is to make sure the UK’s offer is clear, coordinated and compelling to sovereign wealth funds, global investors and Islamic finance market participants. This will require a whole-of-government approach and close coordination with industry to ensure the UK remains the leading western hub for Islamic finance."

FF NEWS TAKE:

This report is a necessary wake-up call. While London has rested on its laurels as the default Western hub, jurisdictions like Luxembourg and Singapore are closing the gap. The suggestion of a digital sovereign Sukuk is the real needle-mover here; it marries the UK’s fintech prowess with ethical finance. If the government fails to provide policy consistency, billions in Shariah-aligned capital will simply flow elsewhere.